Strait of Hormuz disruptions will hit food prices as well as oil, UN warns
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Energy, fertiliser and transport costs have continued to climb, leaving developing economies particularly exposed to price shock.
PHOTO: REUTERS
NEW YORK – The effective closure of the Strait of Hormuz amid the Iran war has rattled global oil markets.
But it is also raising food and fertiliser prices in a way that could hit poorer countries particularly hard, warned a new United Nations report.
The impact of higher energy, fertiliser and transport costs, as well as freight rates and insurance premiums, is likely to “increase food costs and intensify cost-of-living pressures, particularly for the most vulnerable”, the analysis by UN Trade and Development said.
It compared the supply chain shock of the strait’s disruption to major events including the Covid-19 pandemic and the beginning of Russia’s war in Ukraine, which had a sweeping impact on the world’s poorest.
Since fighting began, transit through the narrow passage between Iran and Oman – a critical choke point through which roughly 20 per cent of global seaborne oil and liquefied natural gas flows each day – has dropped significantly.
Traffic was down 97 per cent on March 7 relative to the February average, the report said.
That disruption has already caused oil prices to soar, with Brent crude oil soaring well above US$100 per barrel before falling after President Donald Trump suggested on March 9 that the war might end soon.
Still, energy, fertiliser and transport costs have continued to climb, leaving developing economies particularly exposed to price shocks, given their high debt burdens and increased borrowing costs, the report warned.
Access to fertilisers may worsen for some of the poorest countries including Sudan, Somalia, Tanzania and Mozambique, which get a significant share of their fertiliser imported through the Persian Gulf.
Pakistan, Sri Lanka and Kenya are also exposed, while Australia and New Zealand also get around 30 per cent of their fertiliser from the Persian Gulf.
In total, about a third of global seaborne fertiliser trade, some 16 million tonnes, passed through the Strait of Hormuz in 2024, according to the study.
At the same time, increased borrowing costs have already affected bond yields across the Middle East, with Iraq, Bahrain and Jordan seeing the biggest rise in the region since January. BLOOMBERG
