Major news from the Strait of Hormuz! Russia: Ban on gasoline exports! Economists: Global grain prices face upward risk

The spillover risks of the Middle East conflict are intensifying.

According to the latest news, the Russian government announced a ban on gasoline exports starting April 1, aiming to stabilize prices amid the turmoil in the energy market caused by the Middle East conflict, and to prioritize domestic market supply.

According to a recent report from Xinhua News Agency, Malaysian Foreign Minister Saifuddin Abdullah stated on March 28 that the Iranian government has allowed several Malaysian tankers stranded in the Strait of Hormuz to pass. Saifuddin told the media that given the current tensions in the Middle East, although the relevant tankers have been permitted to transit through the Strait of Hormuz, they still need to wait for an appropriate “window of passage.”

Meanwhile, on March 28 local time, Thai Prime Minister Prayuth Chan-o-cha stated that Thailand has reached an agreement with Iran regarding the passage of its tankers through the Strait of Hormuz.

Russia: Ban on Gasoline Exports

On March 28, according to Xinhua News Agency, the Russian government announced that Deputy Prime Minister Alexander Novak instructed the Ministry of Energy on March 27 to draft an administrative order to ban gasoline exports starting April 1. This measure aims to stabilize prices amid the turmoil in the energy market caused by the Middle East conflict and to prioritize domestic market supply.

According to TASS, after a meeting on March 27 regarding the domestic oil product market situation, the Russian cabinet announced Novak’s directive, which will last until July 31.

Novak stated that the crisis in the Middle East has caused volatility in the global oil and oil products market, leading to significant price fluctuations, but the strong demand for Russian energy resources in foreign markets remains a positive factor. The Russian government stated in a statement that currently, the country’s crude oil processing volume is on par with last year, ensuring a stable supply of oil products.

According to Reuters, to stabilize the domestic market, Russia has previously implemented temporary restrictions on gasoline and diesel exports multiple times.

Since the large-scale military operations initiated by the U.S. and Israel against Iran on February 28, global energy transportation routes through the Strait of Hormuz have been severely obstructed, and international oil prices have fluctuated sharply.

According to a report from TASS on the 26th, Alexander Shokhin, chairman of the Russian Union of Industrialists and Entrepreneurs, revealed that President Putin expressed hope for an end to the Middle East conflict within the coming weeks during a meeting with business leaders. Putin clearly stated that the Middle East conflict has brought extraordinary profits to Russia, as an energy-exporting country, but this situation will not last long. The Russian Ministry of Finance and relevant enterprises should not expect long-term “windfall profits.”

Additionally, Greg Ip, the chief economic commentator for The Wall Street Journal, stated that markets may be underestimating the impact of Ukraine’s ongoing attacks on Russia’s oil and diesel export capabilities. The Kyiv Independent, as shared by Greg Ip, reported that Ukraine is intensifying attacks on Russia’s oil industry, including targeting energy facilities, damaging pipelines, and seizing tankers, actions that have affected about 40% of Russia’s oil supply. Although the global supply disruptions caused by the situation in Iran briefly boosted Russia’s energy revenues, the escalating attacks may have a more profound impact on its export capabilities.

Global Food Prices Face Risk of Increase

Economists have recently warned 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, causing natural gas prices to soar and fertilizer supplies to tighten, leading to increasing pressure on farmers worldwide and posing a risk of rising global food prices.

Carl Skau, Deputy Executive Director of the United Nations World Food Programme, stated that the poorest farmers in the Northern Hemisphere heavily rely on fertilizer imports from the Gulf region, and the current shortages coincide with the beginning of the planting season.

He pointed out, “In the worst-case scenario, this means a decline in next season’s yield or even crop failure; in the best case, higher input costs will be reflected in food prices next year.”

Maximo Torero, the chief economist of the Food and Agriculture Organization of the United Nations, noted that the Strait of Hormuz is a key corridor for global energy and fertilizer transportation, carrying about 20 million barrels of oil daily, accounting for approximately 35% of the world’s crude oil transportation; it also supports significant liquefied natural gas and fertilizer trade, with sulfur from the Gulf region being a crucial raw material for phosphate fertilizer production. The obstruction of this waterway has rapidly transmitted impacts to the global food and agricultural system.

Currently, the supply of two key fertilizers, nitrogen and phosphate, is facing direct threats. Among them, the supply of nitrogen fertilizers (including urea) has been hit the hardest. Urea is the most traded fertilizer globally, promoting crop growth and increasing yields.

Chris Lawson, an analyst at the London-based commodity consultancy CRU Group, stated that this conflict has affected about 30% of global urea trade.

Some countries are already experiencing severe shortages. Raj Patel, a food systems economist at the University of Texas, pointed out that, for example, Ethiopia relies on imports of over 90% of its nitrogen fertilizers from the Gulf region via Djibouti, and this supply chain was already strained before the outbreak of war.

Meanwhile, the supply of phosphate fertilizers, which support crop root development, is also under pressure. Saudi Arabia produces about one-fifth of the world’s phosphate fertilizers; the region also exports over 40% of the world’s sulfur, a key raw material and byproduct in the refining of oil and gas.

Owen Gough, an analyst at Argus Consulting, stated that even if the war ends, producers in the Gulf region will still need clear security assurances before resuming transportation through the strait, and transportation insurance costs will almost certainly rise.

(Source: Securities China)