Iran crisis now expected to raise global food prices including household staples

The implications of the US-Israel strike on Iran go beyond the surge in global oil prices now. The closure of the Strait of Hormuz has disrupted one-third of the global fertiliser trade, sparking fears of a food crisis.

The Strait of Hormuz is responsible for passing through 25%-30% of the world’s raw fertiliser materials, along with a fifth of seaborne oil and gas.

The disruption aligns with the Northern Hemisphere’s spring planting season.

Following the disruption, fertiliser prices are already increasing. Egyptian urea, a global benchmark, has risen more than 25% to $625 per metric tonne, up from below $490 last week.

The disruption not only occurs due to blockage of shipping routes. The drone attacks in Middle Eastern countries also play a significant role in it.

Qatar, which supplies 11% of global urea exports, shut the world’s largest urea plant following drone attacks on its LNG facilities and cut off gas feedstock.

Additionally, Iran itself controls 10-12% of the global urea trade.

The shortage of synthetic nitrogen fertilisers highly affects global food production as they play a significant role in cultivation of crops. Without adequate supplies, crop yields will fall, pushing up prices for household staples.