Tensions in the Middle East threaten global agricultural markets

The recent escalation of Israel-Iran tensions in the Middle East is deeply affecting not only energy markets but also the agricultural sector. Following Israel's airstrikes on Iranian nuclear facilities, prices for key agricultural commodities, particularly wheat, have begun to rise rapidly. Concerns regarding security and continuity in global supply chains are coming to the fore.

September wheat futures in Paris recovered from last week's lows to reach 203 euros per ton, while wheat prices in the Chicago market rose to 5.70 dollars per bushel. Analysts state that this rise is largely driven by short-covering triggered by geopolitical risks. Furthermore, the reflection of rising oil prices on agricultural production costs is also pushing prices upward.

The Persian Gulf and the Red Sea are among the routes of critical importance for global agricultural trade. In 2024, approximately 52 million tons of agricultural products were transported through these routes; this amount corresponds to about 8 percent of global agricultural shipments. According to S&P Global data, approximately 80 ships traversing these routes in mid-June were carrying products such as soybeans, sugar, corn, and wheat. Products originating from Brazil and Argentina, in particular, are at risk. While Brazil leads in corn imports to Iran, it is stated that any disruption to maritime traffic in the region could lead to chain-reaction price increases in agricultural products.

Experts emphasize that geopolitical crises can cause speculative movements in agricultural commodities in the short term, and whether the price increases will be permanent will become clear in the coming weeks. If energy costs and freight premiums remain high, an upward trend in food prices is expected in the second half of 2025.

The indirect impact of rising energy prices on the agricultural sector is also noteworthy. Brent crude oil has exceeded 77 dollars per barrel with an 11 percent increase in the last week. Considering that 40 percent of corn production in the US is used for ethanol production, the increase in energy costs is expected to drive up the prices of products such as corn and wheat as well.

Shipments of basmati rice and tea from India to Iran have almost completely stopped. Iran is India's largest buyer of basmati rice, importing approximately 1.2 million tons of rice annually. Similarly, fertilizer shipments originating from Iran, which are vital for African countries, are also at risk.

With an export capacity of approximately 17 million tons per year, Iran stands out as the world's third-largest urea supplier. However, the recent attacks have created a serious risk of a break in the global supply chain in this area. With the increase in geopolitical risks, a rise in fertilizer prices is also being observed. The war environment is leading to increases in ship insurance costs and delays in shipping routes. In particular, security risks in transits through the Strait of Hormuz threaten fertilizer shipments. Freight and insurance premiums for shipments from Iran to South Asia and Africa have risen by up to 30 percent. Additionally, the possibility of the US imposing additional sanctions on Iran is increasing uncertainty in the market. In the last two weeks, double-digit increases have been seen in UAN, anhydrous ammonia, and urea prices. Major buyers such as India and Brazil have begun searching for alternative suppliers. According to analysts, price increases in fertilizer could continue until the end of 2025. If the conflicts spread and the Strait of Hormuz closes, it is projected that an additional 20-30 percent increase in fertilizer prices could occur.