Not just oil prices! UN warns: Shipping disruptions could drive up fertilizer and food prices

Amid the escalating tensions in the Middle East, multiple ship attacks indicate that the Strait of Hormuz is effectively closed, shaking global oil markets.

However, the latest United Nations report warns that this situation is also driving up food and fertilizer prices, which could hit poorer countries especially hard.

UNCTAD (United Nations Conference on Trade and Development) analysis points out that rising costs of energy, fertilizers, and transportation, along with increased freight and insurance expenses, are likely to “raise food prices and exacerbate living costs, particularly for the most vulnerable populations.”

The report compares the disruptions in the Strait of Hormuz to major events like the COVID-19 pandemic and the Russia-Ukraine conflict, all of which have had profound impacts on the world’s poorest countries.

Since the conflict began, shipping volume through this critical global energy chokepoint has sharply declined. The channel handles about 20% of the world’s seaborne oil and liquefied natural gas daily. The report states that compared to the average in February, shipping volume on March 7 dropped by 97%.

This disruption has driven oil prices sharply higher; earlier this week, Brent crude futures surged to nearly $120 per barrel. However, after Trump hinted on Monday that “the war could end soon,” oil prices retreated.

Nevertheless, the UNCTAD report warns that costs for energy, fertilizers, and transportation continue to rise. Developing economies, burdened by debt and higher borrowing costs, are especially sensitive to these price shocks.

Research shows that about one-third of global seaborne fertilizer trade—around 16 million tons—will need to pass through the Strait of Hormuz in 2024.

The report notes that access to fertilizers may further deteriorate for some of the poorest countries, including Sudan, Somalia, Tanzania, and Mozambique—many of which import fertilizers via the Persian Gulf.

Pakistan, Sri Lanka, and Kenya also face risks, while Australia and New Zealand, both developed nations, source about 30% of their fertilizers from the Persian Gulf region.

Meanwhile, rising borrowing costs have affected bond yields in the Middle East. Since January, Iraq, Bahrain, and Jordan have seen the largest increases in government bond yields in the region.

(Source: Cailian Press)