Traffic in the Strait of Hormuz has remained largely at a standstill as a result of the cease-fire agreement between the US and Iran, underscoring how difficult it will be to restart the vital energy and trade flows that power the world’s agriculture.
For more than a month, Iran’s war and the effective closure of the Strait of Hormuz – an important sea point – has caused a shock in the energy and agricultural sectors, as the conflict has affected the production and transportation of essential goods. The price of urea, a fertilizer, has risen by a similar amount 40 percentwhile energy costs have increased worldwide, forcing government tens take urgent measures to prevent fuel shortages and help consumers bear the higher costs.
Traffic in the Strait of Hormuz has remained largely at a standstill as a result of the cease-fire agreement between the US and Iran, underscoring how difficult it will be to restart the vital energy and trade flows that power the world’s agriculture.
For more than a month, Iran’s war and the effective closure of the Strait of Hormuz – an important sea point – has caused a shock in the energy and agricultural sectors, as the conflict has affected the production and transportation of essential goods. The price of urea, a fertilizer, has risen by a similar amount 40 percentwhile energy costs have increased worldwide, forcing government tens take urgent measures to prevent fuel shortages and help consumers bear the higher costs.
Even with a temporary ceasefire, almost all of these challenges have not yet materialized. “It does not resolve any uncertainty about when we will return to normal, reliable, low-risk business and manageable prices for oil and fertilizer,” said Christopher Barrett, an agricultural economist at Cornell University.
One of the biggest uncertainties is the control of the Strait of Hormuz. It is still unknown what exactly the United States and Iran have agreed on the strategic waterway, with both sides giving, at various points, conflicting terms and conditions.
After the ceasefire was announced, Sultan Ahmed Al Jaber, head of the Abu Dhabi National Oil Company, announced in LinkedIn Post that the strait is “not open” and that “access is restricted, restricted and controlled.”
US President Donald Trump has lashed out at Tehran on various social media sites, in a sign that things will not be settled ahead of high-level talks this weekend. “Iran is doing a very bad, disrespectful job some might say, allowing Oil to pass through the Strait of Hormuz. That is not the deal we have!” He said in the post Social Reality.
Back and forth has done little to reassure companies. “Shipping companies and shippers are waiting for more clarification from the United States and from Iran about exactly what they agreed to,” said Caitlin Welsh, director of the Global Food and Water Security Program at the Center for Strategic and International Studies, a Washington-based think tank.
With vital energy infrastructure damaged by the chaos engulfing the Strait of Hormuz, experts warn that prolonged energy shortages will only continue to cripple the agricultural sector. And analysts are not betting on immediate relief.
Wood Mackenzie, an international research company, estimates that even with a two-week ceasefire, it will take months to restore Middle East energy production to normal, and the US Energy Information Administration has done just that he warned that oil prices may continue to rise for several months even after the opening of the Strait of Hormuz.
All of that spells trouble for global agriculture, which depends on energy for everything from transportation fuel to natural gas that’s used as food to fertilizer.
“There is a lot of energy involved in food at almost every stage of processing and transportation to get it from farm to retail,” said Joseph Glauber, a former chief economist at the US Department of Agriculture who is now at the International Food Policy Research Institute (IFPRI).
Take diesel, which powers larger equipment, such as farm machinery and trucks that transport food from warehouses to grocery stores. Diesel has a price spiked due to the war, and Glauber said that farmers see high costs of energy and fertilizers when most agricultural prices. they are down-more cutting in their margins.
And the pain may not affect the farmers either. “Everything we buy more or less goes on a truck or a train as soon as it comes in from the coast, so the inflationary consequences of rising diesel prices are huge,” said Kevin Book, managing director of ClearView Energy Partners, a consultancy.
From Ireland to India, the economic shock of the war is already spreading through farming communities around the world. Farmers took to the streets in Ireland this week to protest the price of oilwhile the costs of fertilizers are increasing have been reported roiled farmers across England. Egypt has reduced prices without subsidy bread to protect consumers from high prices, and in Vietnam—the world’s second-largest rice exporter—high costs and shipping delays have hampered it. rice cultivation.
In front of local electionsIndia’s government this week raised its fertilizer subsidy to farmers, in an attempt to help the group from rising global prices.
“The welfare of our farming brothers and sisters remains the top priority of our government,” Indian Prime Minister Narendra Modi said post on X. “This will ensure that our food service providers continue to receive fertilizer as cheaply as before.”
On Wednesday, after Trump announced a two-week ceasefire, the World Bank, the International Monetary Fund (IMF) and the United Nations Food Program issued joint statement warning that the economic effects of the Iran war would disturb societies around the world.
“The rapid increase in the price of oil, gas and fertilizers, as well as transportation restrictions, will inevitably lead to rising food prices and food shortages,” the statement said. IMF chief Kristalina Georgieva added that on Thursday 45 million people are at risk of starvation, bringing the total to 360 million people worldwide.
Barrett, the Cornell economist, said that landlocked, corn-dependent countries in sub-Saharan Africa would be most vulnerable to the effects of war. “Maize prices will rise rapidly in the next few months if the ceasefire is not permanent,” he said.
It may not just be war, either; Future climate events may further complicate the outlook for global food security. The European Center for Medium-Range Weather Forecasts has predicted possibility El Niño weather pattern this year, which occurs when the surface temperature of the sea in the Pacific Ocean reach 2 degrees Celsius above average. That could have huge implications for agriculture.
“If we’re going to have a climate shock along with this world price shock, then I think we could start to see real food shortage concerns later in the year,” James Thurlow, director of foresight and policy development at IFPRI, said at a press conference Friday.
