Food shock is inevitable due to the Iran war – and it could get bad is attracting attention across the tech world. Analysts, enthusiasts, and industry observers are watching closely to see how this story develops.
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Food prices are expected to rise later this yeardpa picture alliance/Alamy
Global food prices hit their highest levels on record after the 1970s energy crisis, triggered by conflict in the Middle East, once inflation is corrected for. Could we be headed for a new record – the worst food shock ever – as fuel, fertiliser and pesticide prices skyrocket because of the turmoil in Iran?
Faced with soaring costs, many farmers are likely to plant less in the coming weeks, leading to shortfalls and rising food prices later this year. This is already happening, but just how bad it will get depends on many factors, from how long the war continues to how hard global warming-fuelled weather extremes hit crops this year.
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“The potential is there for this to develop into a major crisis for poor and hungry people,” says Matin Qaim at the University of Bonn in Germany.
“We are in a bit of a perfect storm, and there isn’t any easy way out of this,” says Tim Benton at the University of Leeds, UK. “Even if everything was solved tomorrow, it will take some time, as we’ve found with post-covid reconstruction.”
After declining for decades after the 1970s peak, global food prices have, in real terms, been rising since the 2000s and aren’t far off that 1970s record. Climate change is a big factor, with more extreme heat, floods and storms hitting yields, sometimes to the extent of causing global food shocks like that seen in 2010. The covid-19 pandemic and Russia’s war on Ukraine also led to big jumps.
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Rising biofuel production is also pushing up food prices, with more than 5 per cent of food calories now being turned into fuel rather than eaten. While some governments have acknowledged that food-based biofuels should be phased out, a recent report estimated that 92 per cent of biofuels will still be food-based in 2030.
Now, the US and Israeli attacks on Iran are leading to a big shortfall in the raw materials crucial for food production and distribution. Fuel is the obvious one. Diesel fuel is what powers a lot of farm machinery, as well as the ships and trucks that move food around, so increases in the price of oil eventually lead to higher prices in supermarkets.
Then there are fertilisers, which are essential for feeding the world. “If we stopped using mineral fertiliser completely worldwide, we would probably see half of the world starving,” says Qaim.
Nitrogen fertilisers are made by reacting hydrogen with atmospheric nitrogen to produce ammonia, with natural gas supplying both the hydrogen and power. The ammonia is then usually turned into urea, a solid that is convenient for transport.
Because of its huge natural gas resources, Qatar has become a major fertiliser producer. It makes 15 per cent of the urea used worldwide, says Anthony Ryan at the University of Sheffield, UK, and 50 per cent of the urea that is sold on international markets. Now, little of that urea is getting through the Strait of Hormuz, the narrow waterway between Iran and the Arabian peninsula.
That’s not all. Countries such as India, Bangladesh and Pakistan produce much of their own fertiliser, but did so using gas from the Persian Gulf. Now, fertiliser plants in these nations are having to shut down. With natural gas production facilities in the region damaged by war, this disruption could continue for years. Meanwhile, a major fertiliser plant in Australia also had to shut down because of an accident.
As a result, nitrogen fertiliser prices are already up by more than a third and could get much higher, says Qaim. “If fertiliser prices double, then it could easily be that food prices increase by 20 to 30 per cent.”
And it isn’t just urea. Gulf countries such as Qatar and the United Arab Emirates are also major producers of the sulphur fertilisers needed in many areas and of the sulphuric acid required to convert mined phosphate into forms that plants can use.
Urea fertiliser is prepared for export at a port in Yantai,ChinaCN-STR/AFP via Getty Images
Urea fertiliser is prepared for export at a port in Yantai,China
Then there are pesticides, also crucial for maintaining global food yields – especially when many pests are spreading and becoming more problematic as the world warms. Pesticide prices are linked to those of naphtha, a fossil-fuel derivative that is turned into a huge range of chemicals, including plastics widely used in food packaging.
“Three of the world’s global naphtha-exporting hubs have been struck by drones so far in March,” says analyst Jide Tijani at Argus Media in the UK. This includes the Ust-Luga port in Russia, just hit by Ukraine, as well as locations in Qatar and the UAE.
All these effects will feed through into higher prices for food and many other goods in the coming months and years. “The number of markets that are being affected by this is staggering,” says Jason Hill at the University of Minnesota.
The issue isn’t just that farmers will have to pay a lot more for fuel, fertilisers and pesticides, says Qaim, assuming they can get them at all. It’s that if farmers aren’t sure they can make a profit, they may plant different crops or none at all. Meanwhile, speculation and profiteering could drive up prices even more, says Jennifer Clapp at the University of Waterloo in Canada.
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How bad will it get? The big spike in food prices in the 1970s occurred partly because global food reserves had run low, says Clapp. For now, food reserves are plentiful, but that could change if the conflict drags on, especially if warming-fuelled extreme weather hits yields too.
“There’s a lot of potential for this to spin out of control and lead to a just as severe, if not a worse, crisis,” says Clapp. “If we have major climate events, it could definitely spiral into something much more severe.”
“In the end, prices are global prices, and fertiliser prices are going up everywhere, and food prices are going up everywhere. [People who] are at the lower spectrum of the income distribution are the ones that are most hurt, because they spend a lot on food. They can’t afford significantly rising food prices,” says Qaim.
What’s more, there have already been big cuts in international aid, and more are likely. “When food prices go up and international aid is more needed, the availability of the money goes down and the price of what it can buy goes up,” says Benton.
The consequences will include social unrest in the countries hit hardest, says Paul Behrens at the University of Oxford. “Every time that we’ve seen a food price spike in the past, you see this instability.”
There is a way to limit the damage. “We’re burning about 15 million loaves of bread in Europe every day for biofuels,” says Behrens. “This is a crazy way to produce energy.”
The production of biofuels is driven largely by subsidies and state mandates, so governments have the power to cut biofuel production and release more food on the market. “It could definitely help,” says Qaim.
He thinks there should be an international agreement to automatically limit biofuel production from food when food prices get too high, but countries aren’t even doing this unilaterally. “We haven’t seen that happening in previous crises,” he says.
On the contrary, what is likely to happen instead is that nations increase biofuel production to try to limit fuel price rises, says Qaim. This could have a big additional effect on food prices on top of everything else.
It is already starting to happen. The US has announced it will increase the proportion of bioethanol in fuels to try to limit price increases, and Australia is considering it too.
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In 2020, the world produced more than enough calories to feed the global population, but only half of those calories reached people’s plates due to rising meat and biofuel production
The thing is, increasing biofuel production from food won’t make much difference to fuel prices, but does have a big impact on food prices. For instance, in the US, a third of corn is turned into bioethanol, but this bioethanol only supplies a few per cent of the gasoline supply, says Hill. “There’s a disproportionate effect on food markets.”
“Blending more ethanol into gasoline is a policy from the 1990s, one that doesn’t help fight air pollution or climate change,” says Simon Donner at the University of British Columbia in Canada. “The oil price spike could be an opportunity to help Americans shift to the cleaner and more advanced tech innovation of the future: electric vehicles. Instead, the US government is going backwards.”
But the rest of the world isn’t going to want to be put in the same position again. “This is a major shock to the platform and so, even if things were to go back to the status quo in terms of movement of ships and production and such, there is going to be, in everyone’s mind: ‘How can we produce a more resilient platform?’,” says Hill.
Accelerating the shift to renewable energy, electric vehicles and heat pumps, which are needed for the net-zero transition, will also make economies far less vulnerable to oil price shocks. But beyond that, we also need to decouple the entire chemical industry from fossil fuels, says Ryan.
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For nitrogen fertilisers, that means producing them from electricity instead of natural gas. “Absolutely, you can do a no-greenhouse-gas-emissions ammonia,” says Ryan. “The tech innovation is there. What we don’t have is enough renewable electricity.”
And with rising demand for electricity to power data centres for artificial intelligence, this situation seems unlikely to improve anytime soon unless the AI bubble bursts.
In the meantime, there is a lot that can be done to reduce fertiliser use. In fact, fertilisers are overused in many regions, with the excess washing into rivers and seas or turning into the highly potent greenhouse gas nitrous oxide. Ways to reduce overuse include precision farming technologies, crop rotation with legumes, better use of manure and breeding plants that use fertilisers more efficiency.
“So it’s a push towards more sustainable farming platforms, but sustainable is not equivalent to organic,” says Qaim. Going organic would lead to huge price rises because of lower production and greatly increase deforestation because of the need for more farmland, he says.
“We need a food platform transformation,” says Behrens, and part of this has to be a change in diets – for instance, getting most of our protein from beans and legumes that make their own fertiliser, rather than from grain-fed meat. “It makes such a big difference,” he says.
Why This Matters
This development may influence user expectations, future product strategy, and the competitive balance inside the broader technology industry.
Companies in adjacent segments often react quickly to similar moves, which is why stories like this tend to matter beyond a single announcement.
Looking Ahead
The full impact will become clearer over time, but the story already highlights how quickly the modern tech landscape can evolve.
Observers will continue tracking the next steps and how they affect products, users, and the wider market.
