S&P Global Warns Hormuz Energy Shock Could Become A Global Food Crisis

The world’s ongoing energy crisis is quickly turning into a global food security crisis. Ongoing conflict between some of the world’s most prominent economies on two major fronts – Russia’s war in Ukraine and the United States’ and Israel’s war in Iran – is creating geopolitical shockwaves through critical global trade routes and threatening some of humanity’s most essential commodities, from oil and gas to grain and fertilizer.

A “multidirectional squeeze on world agriculture” is taking form, according to a new ‘thought leadership report’ by the S&P Global Institute, published on Monday. “Global food prices are impacted in two ways: diesel is an important input cost for farmers, and farmers may direct acreage away from food production to feedstock for biofuels,” the report explains.

Before the United States and Israel began their military offensive in Iran in February of this year, one half of all the world’s fertilizer feedstock exports passed through the Strait of Hormuz. Chemicals including urea, ammonia, sulfur, hydrogen, natural gas, and nitrogen are critical components in nitrogen-based fertilizer, which serves as a foundational input for sustaining global food security in today’s agrifood systems.

In particular, the cultivation of staple crops like corn, wheat, and rice, which are almost entirely grown in industrialized monocropping systems, is severely dependent on chemical fertilizers to meet production needs. This means that, if global fertilizer supply chains are compromised, half of the world’s calories are at risk. After the Strait of Hormuz closed to nearly all shipping traffic on February 28, fertilizer prices surged enormously, rapidly doubling their previous levels.

“The disruption of the Strait of Hormuz can push 45 million more people into hunger and starvation,” the United Nations’ Jorge Moreira da Silva said back in April. “So, clearly, we need to do something.” But now, six months later, the threat of hunger still looms large.

While the Strait is no longer at a standstill, the control of the waterway is still contentious and highly precarious, with violence and disruption quickly setting in as the ‘new normal’ in the vital trade artery. And even if the United States and Iran maintain their extremely fragile agreements, fertilizer production won’t bounce back overnight. “Fertilizer companies will still have to wait for natural gas production in the Gulf to ramp up to regain their feedstock supply, which will take months or even years,” reports Semafor, a nonpartisan news outlet.

The International Monetary Fund’s World Economic Outlook projects an overall 10 percent increase in fertilizer prices by the end of this year, contributing a 5 percent hike in food costs in 2026 and another 2.4 percent in 2027, with variation by region. As usual, it is the poorest countries that will be hit the hardest.

“The compounding effect of higher energy and fertilizer costs, resilient biofuel-linked demand and El Niño-related weather risk puts pressure on food prices and, ultimately, food security,” the S&P Global report concludes. “The risk is increasing, especially for low-income countries, where food costs amount to about half of household spending.”

While a global food crisis is not a certainty, pressure on cash-strapped consumers is – with grave consequences for the global poor. If enough of the global population cannot afford to eat, this could, in turn, result in more conflict. Historically, food price shocks and inflation of prices for food staples is a key driver of conflict. Many experts believe that the Arab Spring, for example, was a direct result of rising food costs across the region. Adding food inflation and rising hunger rates to an already tumultuous geopolitical climate could fan the flames of conflict and civil unrest in the coming months.

By Haley Zaremba