FAO: The US, Israel, and Iran conflict is rapidly impacting global food and energy supply chains

Economic Observer According to reports from CCTV News Client, on March 26 local time, the Food and Agriculture Organization of the United Nations stated that the current conflict between the U.S., Israel, and Iran has triggered one of the most rapid and severe shocks to global commodity flows in recent years. Shipping through the Strait of Hormuz is obstructed, leading to increased costs for energy, fertilizers, and shipping insurance, with ongoing spillover effects impacting global food security and the stability of agricultural supply chains.

Maximo Torero, the FAO’s Chief Economist, introduced at a media briefing that the Strait of Hormuz is a key passage for global energy and fertilizer transport, carrying about 20 million barrels of oil per day, which accounts for approximately 35% of global crude oil shipments; it also significantly facilitates the trade of liquefied natural gas and fertilizers, with sulfur in the Gulf region being an important raw material for phosphate fertilizer production. The obstruction of shipping routes has quickly transmitted shocks to the global food and agricultural system.

Torero indicated that the current shipping risks are driving up agricultural input costs: wartime insurance rates in the Gulf region have surged from 0.25% to as high as 10%, reassessed every seven days; urea prices have risen sharply, with farmers in multiple countries facing dual pressures from rising fertilizer and fuel costs.

Torero pointed out that the duration of the conflict will directly determine the extent of spillover effects: if the situation eases within a month, the market may gradually absorb the shock; if supply is disrupted for an extended period, it will severely hinder the next planting season. If oil prices exceed $100 per barrel, demand for biofuels may be reactivated, creating new competition with food consumption, further driving up food prices, which will also impact major agricultural exporting countries.

The FAO urges the international community to open alternative shipping routes, provide emergency support to countries reliant on food imports, and offer financing support to farmers; at the same time, it calls for avoiding the implementation of food export restrictions to prevent exacerbating global food price and energy market volatility.