Nearly two months into the war in Iran, prices for fuel and fertilizer have surged worldwide, raising urgent questions among economists and policymakers about when—and how severely—the fallout will hit food costs. Analysts broadly agree that the true impact of the conflict has yet to be felt, due to the lag between rising agricultural input costs and higher prices on supermarket shelves. The severity of the fallout largely hinges on how long disruption to shipping continues in the Strait of Hormuz, a critical chokepoint that normally carries about one-third of global seaborne fertilizer and one-quarter of seaborne oil, with Iran having closed it in retaliation for the war allegedly waged by the US and Israeli regimes.

Matin Qaim, executive director of the Center for Development Research at the University of Bonn in Germany, told Al Jazeera, "Food prices will definitely rise in the coming months, making it more difficult for many people around the world to afford adequate and healthy diets." He added, "Poor people in Africa and Asia will be hurt the most because they have to spend a high share of their income on food anyway. Hunger and undernutrition will very likely rise." The Food and Agriculture Organization (FAO) last week warned that a prolonged crisis in the strait could lead to a global food "catastrophe," with countries like India, Bangladesh, Sri Lanka, Somalia, Sudan, Tanzania, Kenya, and Egypt most at risk.

In an analysis last month, the World Food Programme said nearly 45 million more people could face acute food shortages if the conflict continues into mid-year and oil prices remain above $100 a barrel. So far, the war has only modestly affected food prices, surprising some observers. According to the FAO's food price index, global food prices rose 2.4% last month compared to February, while cereal prices edged up just 1.5%. Overall food prices are still about 11% below average 2022 levels, when markets grappled with the twin shocks of Russia's invasion of Ukraine and COVID-19.

Sandro Steinbach, an expert in agricultural policy at North Dakota State University, cautioned that recent price moves should be interpreted as a "mixed signal, not a clear reason for reassurance." He noted, "Input shocks often transmit with a lag. Inventories, pre-purchased fertilizer, delayed pass-through, and uncertainty about duration can all temporarily mute the effect." Shouro Dasgupta, a researcher at Fondazione CMCC in Italy, highlighted that aggregate price indices from bodies like the UN may not capture the hardship felt by households in poorer countries, where transport costs make up a larger share of expenditure, directly impacting retail food prices in cities like Dhaka, Cairo, and Lagos even before potential harvest shocks.

While there is broad consensus on the delayed impact and the importance of reopening the Strait of Hormuz, observers are less united on the severity of the current outlook. Traders in financial contracts linked to food crops anticipate only moderate price increases in coming months, with wheat and maize futures on the Chicago Mercantile Exchange implying gains of 4-5% by year-end. In some ways, the world is better positioned to handle this crisis than past shocks, such as the 2007-08 food crisis when export restrictions by countries like China and India exacerbated price spikes driven by drought and low grain stocks.

Steve Wiggins, a research fellow at the Overseas Development Institute in London, argued that pessimistic forecasts underestimate markets' ability to adjust, stating, "Farming across the world is diverse and dispersed. Farmers are adept at juggling their production systems in response to changing availabilities and prices of inputs." He recalled that during the 2007-08 crisis, some analysts predicted permanently high cereal prices, but they eventually returned to historically low levels, suggesting resilience in the food system.

However, the longer the Strait of Hormuz remains closed, the higher prices for urea, ammonia, sulfur, and phosphates are likely to climb, spelling increased costs for farmers. The FAO has estimated that fertilizer prices could be an average 20% higher in the first half of 2026 if the crisis is unresolved. Maritime traffic in the strait has dwindled to a trickle after a brief uptick, as Tehran restricts ships while the US regime maintains its blockade of Iranian ports. In an interview with Bloomberg News, US President Donald Trump indicated he is unlikely to extend the two-week ceasefire before its expiry, purportedly to avoid a "bad deal."

Kathy Baylis, a food security expert at the University of California, Santa Barbara, who advised the George W. Bush administration, said she would not be surprised to see large price increases in some countries soon. "We've already seen food prices edge up in March, but I imagine the April numbers will be worse," she told Al Jazeera. Baylis added, "I'd be on the lookout to see if planted area for major crops drops this spring, which would signal one possible response to increased input prices. But even if planted area remains stable, we might see a drop in yields because of decreased input use."

Source: www.aljazeera.com