The Strait of Hormuz Closure Is Already Hitting Supermarket Prices
- Crop prices just hit a three-year high as Black Sea attacks and heat waves squeeze the global grain supply.
- The Strait of Hormuz closure has blockaded 3.9 million tonnes of Middle East urea exports, about 30 percent of the region's annual fertilizer trade.
- A new UN report warns that conflict-driven energy and fertilizer costs could push 9 to 18 million more people into hunger worldwide.
Crop prices just hit a three-year high, indicating major downstream pain soon to come at the supermarket. There are two major factors leading to high crop prices and a potential global food crisis: heat waves and intensifying conflict in the Black Sea threatening to disrupt global grain trades, and volatility in fertilizer markets stemming from the war in Iran and the closure of the Strait of Hormuz.
The International Food Policy Research Institute (IFPRI) is referring to the unfolding situation in fertilizer supply chains as an “input crisis” that could soon develop into a full-blown food crisis, especially in poor countries. Synthetic fertilizer is a petroleum product, and markets for fertilizers and fertilizer components like urea and phosphate are therefore extremely sensitive to oil shocks and supply disruptions. About one-third of the world's urea imports come from the Middle East. Since the Strait of Hormuz closed to shipping traffic earlier this year, 3.9 million tonnes of urea exports, or about 30 percent of the region's annual fertilizer exports, have been effectively blockaded.
Fertilizer prices spiked in the months after the Strait initially closed at the end of February, but had since stabilized. However, prolonged conflict in the region threatens to create sustained volatility in the market as factories cut back on fertilizer production and stockpiles threaten to spoil. “Most production facilities in the region continue to operate at reduced rates to prevent excessive stockpiling,” IFPRI reports. “While urea can generally be stored for several months, high temperatures and moisture can damage its quality. The risk of substantial fertilizer supply shortages is rising as the conflict prolongs and the Strait of Hormuz stays closed.”
In addition to the supply chain disruptions in the Middle East, Ukrainian ports in the Black Sea are now the site of renewed conflict, causing major supply chain disruptions for staple grains. Moreover, Ukraine's exports of corn, barley, wheat, and meslin already remained far lower than their 2020 levels, before Russia's invasion. This deficit has also had a considerable and ongoing impact on global food security, as Ukraine is a major agricultural exporter.
A new United Nations report warns that the effects of rising energy and fertilizer prices, driven by global conflict including the United States and Israel's war in Iran as well as Russia's ongoing war in Ukraine, could result in an additional 9 to 18 million people going hungry around the world. The report found that, on a global level, the average cost of a healthy diet increased by nearly 25 percent between 2021 and now, from 3.44 purchasing power parity (PPP) dollars per person per day to 4.28 PPP. Latin America and the Caribbean face the highest average costs, at a painful 4.91 PPP.
The most recent oil and fertilizer shock emanating out of the Strait of Hormuz hit markets at a vulnerable time, when they are still contending with the fallout of Russia's war in Ukraine and facing mounting pressure from climate change. “We are in a current era where we have the highest number of conflicts and are still increasing,” International Fund for Agricultural Development (IFAD) President Alvaro Lario told the Associated Press earlier this month, adding that “Whenever there is a conflict, also hunger, displacement and refugees increase.”
Solving the problem will require sustained efforts in a time of unprecedented global uncertainty and insecurity. “Ending hunger and making healthy diets affordable requires political commitment, sustained investment and enabling policies,” QU Dongyu, the Director-General of the United Nations Food and Agriculture Organization, was quoted by EuroNews. “Recent crises – from natural disasters like the COVID-19 pandemic to man-made disaster like hotspots of conflicts, the war in Ukraine, the Gaza crisis, and the recent Strait of Hormuz disruption - have demonstrated both the resilience of agrifood systems and the need to strengthen them further to better serve the world's most vulnerable people, farmers and consumers,” Dongyu went on to say.
By Haley Zaremba for Oilprice.com
Hormuz Tanker Crossings Sink to Lowest Level Since May as War Risk Spikes
Only one oil tanker transited the Strait of Hormuz on Thursday, the lowest number of crossings since May 7, as war risks spiked this week to hike crude oil prices above $100 per barrel again.
Three tankers transited the Strait of Hormuz on Wednesday, but this number crumbled to just one on Thursday, according to Kpler’s vessel-tracking data cited by Reuters on Friday.
The New Giant, a supertanker loaded with about 2 million barrels of Basrah crude from Iraq, exited the Strait of Hormuz on Thursday, with China’s Rizhao port expected to welcome it in the middle of August, the data showed.
At the same time, no tanker made an inbound transit through the Strait into the Persian Gulf on Thursday.
Traffic at the Bab el-Mandeb Strait in the Red Sea held relatively high despite the Houthi attacks on vessels and threats of blockade at Saudi Arabia’s key export valve in the absence of Hormuz traffic.
However, some tankers were observed to have turned north in the Red Sea, toward the Suez Canal, to avoid being targeted by the Houthis, the Iran-aligned group in Yemen which emerged as the new threat to oil supply from the Middle East.
Voyages from the Red Sea through the Suez Canal, the Mediterranean, and around the southern tip of Africa make the delivery time of energy commodities to Asia three times longer than through the Bab el-Mandeb Strait.
Aramco, the Saudi oil giant that had managed to re-route most of its shipments away from Hormuz via Bab el-Mandeb, has begun offering crude loadings at Sidi Kerir, the Egyptian port on the Mediterranean, Reuters reports.
“Further escalation in the Persian Gulf and fears of a widening conflict are putting a significant amount of oil supply at risk,” ING commodity analysts said in a note on Friday, pointing out the Houthis’ attacks on Saudi tankers in the Bab el-Mandeb Strait and President Trump’s fresh threats against Iran.
By Tsvetana Paraskova for Oilprice.com
The Hormuz Crisis Is Driving a Geopolitical Shift Across Asia
- Rising tensions around the Strait of Hormuz are making energy security a central strategic concern for Southeast Asian governments.
- Analysts argue that dependence on Middle Eastern oil could push ASEAN members toward greater energy cooperation with Russia while creating diplomatic opportunities for China.
- The crisis highlights how economic security and national security have become increasingly intertwined across the Indo-Pacific.
For years, policymakers in Washington have viewed Asia primarily through the lens of Taiwan, the South China Sea, and China's military rise. Russia's full-scale invasion of Ukraine has only reinforced that perspective, cementing Europe and East Asia as the principal arenas of geopolitical competition.
But security experts in Southeast Asia increasingly argue that another crisis thousands of kilometers away in the Middle East may ultimately reshape the regional balance of power far more profoundly than either Ukraine or Taiwan.
The strategic importance of the Strait of Hormuz, through which roughly a fifth of the world's oil passes, has become impossible for governments across Southeast Asia to ignore.
As tensions involving Iran threaten one of the world's most important energy chokepoints, analysts say the consequences are already altering regional calculations about security, diplomacy, and alliances.
"We're already seeing ASEAN (the Association of Southeast Asian Nations) moving toward Russia, not in security but in energy reliance," Lester Joseph Buitizon, a Manila-based threat intelligence analyst with Aldebaran Threat Consultants whose work focuses on international security and politics in the Middle East and North Africa (MENA), told RFE/RL.
Military operations between the United States and Iran in recent days have renewed attention on the Strait of Hormuz.
Iran is claiming control of the strategic transit route, while the United States says it has been launching air strikes aimed at targets in southern Iran "to further degrade Iranian military capabilities used to attack commercial shipping in the Strait of Hormuz."
Despite a significant US military presence, shipping companies remain reluctant to transit the strait, highlighting a reality that extends beyond naval power: The greatest challenge may be restoring confidence among commercial operators.
Oil transit in the Strait of Hormuz is of critical importance to Southeast Asia because it remains deeply dependent on Middle Eastern energy.
The Philippines, for example, imports more than 90 percent of its oil from the Middle East, making disruptions in flow an immediate economic and political concern rather than a distant foreign policy issue.
Although Manila remains one of Washington's closest treaty allies and public opinion continues to favor the United States over China, the Marcos administration has sought to increase Russian crude access and expanded discussions over long-term energy cooperation.
For Buitizon, the message is simple. If even America's closest regional ally is forced to engage Moscow to safeguard energy supplies, countries with more neutral foreign policies such as Indonesia and Malaysia are likely to do so even more readily.
"If Russia successfully reorients its economy eastward," he argues, "Western sanctions become structurally less effective."
While Russia may gain economically, China may see diplomatic gains amid the same situation.
There was a time, according to Vincent Kyle Parada, a defense research analyst with the Philippine Navy's Office of Naval Strategic Studies and Strategy Management, when ASEAN could successfully hedge East and West: China provided economic growth, while the United States guaranteed regional security.
Today, Parada said, that distinction is becoming increasingly blurred. He pointed to the Iran crisis as evidence that economic security and national security have become inseparable.
"The overlap between economics and security has become much greater than it was 10 or 20 years ago," Parada told RFE/RL.
He added that recent US policy decisions, including reductions in regional development assistance, trade tensions, and intervention in Iran have weakened Washington's foothold across Southeast Asia while creating opportunities for China to expand its economic influence.
"China doesn't really need to do anything but wait," he said.
By RFE/RL
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