How US-Israeli war with Iran is crippling oil, food supplies globally

Editor's note: The conflict in the Middle East is not only a geopolitical contest, but also a crisis whose costs are increasingly shared across the globe. From energy and food to tourism and cultural exchange, individuals, industries and economies worldwide are being drawn into its ripple effects, often as involuntary stakeholders. CGTN presents a special series, examining the far-reaching impacts of the crisis from multiple perspectives, including energy, commodities, and global economic resilience. The series will also explore a central question facing the international community: who ultimately bears the cost of war in an interconnected world.

Reported strikes on Iran's South Pars gas field – part of the world's largest natural gas complex – and Tehran's subsequent warning that oil facilities across the Gulf could become targets mark a significant escalation in the US-Israeli military campaign. What began as a series of military operations is now spilling into critical energy infrastructure, raising the risk of wider regional disruption. As tensions spread beyond Iran's borders, the consequences are cascading through global energy markets, fertilizer supply chains and food systems, amplifying economic pressures and exposing how the costs of conflict are increasingly borne far beyond the battlefield.

The escalation in the Middle East has sharply disrupted global energy supply, with the International Energy Agency (IEA) warning of mounting risks to oil availability due to prolonged tensions.

The Strait of Hormuz, which carries 36% of the world's seaborne oil exports, has almost ground to a halt amid escalating US-Israel strikes, devastating global oil supplies.

Data from Belgian firm Kpler shows exports from eight major Gulf oil producers, including Saudi Arabia, Iran and Iraq, plummeted 61% in the week to March 15, falling from 25.13 million barrels per day in February to 9.71 million barrels.

Crude spot markets are under extreme pressure. Reuters reports Omani crude, exported through the strait, has a record $51-per-barrel premium over Brent, set to push May-loaded prices to around $150. Dubai crude's spot premium hit $56 on March 16.

Nations have acted to ease the crisis. The IEA's 32 members agreed to a record 400 million-barrel release of strategic reserves. Japan, heavily dependent on Middle Eastern oil, launched its largest-ever reserve release (80 million barrels, enough for 45 days). South Korea imposed its first oil price cap in 30 years, while the US temporarily relaxed Russian oil sanctions and Australia released 762 million liters of fuel.

Crude futures keep rising. On March 18, May Brent briefly topped $110, closing at $107.38 (up 3.83%). Citigroup predicts it could hit $120 soon, and a prolonged strait disruption could force prices into the $130s a barrel in Q2 and Q3.

Council on Foreign Relations senior fellow Brad Setser Tuesday warned a 10 million-barrel daily supply cut could push prices to $170, slashing US growth by at least 1%.

Experts also caution that stockpiles cannot substitute for sustained production. Even if shipping routes reopen quickly, restoring supply could take weeks or months.

The strait's blockade has paralyzed global fertilizer trade – one-third of which passes through it. The Middle East accounts for 35-40% of global urea exports – the most widely used nitrogen fertilizer globally – more than its crude share. Urea prices have risen 35-40% since the conflict, with 1.1 million tonnes of fertilizer stranded in the Gulf, The Guardian reports.

The knock-on effects are already emerging. The shortage of fertilizer is hitting agriculture hard. The US imports 15% of its fertilizer from the Middle East; American Farm Bureau Federation President Zippy Duvall called it a "national security issue" for farmers. Analysts warned the current situation could push US household food prices up by 2%.

The United Nations also warned that as many as 45 million more people could face acute hunger if the conflict in Iran doesn't ease by the middle of the year, taking the total number to a record high.

According to a statement released by the UN's World Food Programme (WFP), energy and food markets are tightly correlated, with the disruption to maritime traffic in the Gulf rippling out to impact the most vulnerable in countries such as Sudan and Somalia, where prices of essential commodities have already soared.

Nations in sub-Saharan Africa and Asia, which are heavily reliant on food and fuel imports, are most exposed to fallout from the conflict, the WFP said. Projections indicate that the number of food-insecure people in those regions is set to jump by about a fifth, it added.

The conflict is pushing up shipping costs via freight, insurance and fuel. Detours around the Cape of Good Hope add 3,500-4,000 nautical miles (10-14 days) and 15-20% to freight rates. CMA CGM charges a $2,000-$4,000 per-container conflict surcharge; Hapag-Lloyd's war risk fee hits $1,500 per container.

Marine insurance premiums have skyrocketed from 0.25% to 3% for tankers, meaning a $200-300 million vessel now faces a $7.5 million premium. Some Gulf route quotes hit 10% of a ship's value; a $138 million supertanker could pay $14 million to cross the strait. 

Vincent Clerc, chief executive of Maersk, told the BBC that increased transport costs resulting from shipping disruptions caused by the conflict in Iran will be passed on to consumers.

Supply chains are being forced to adapt. Key raw material supplies (aluminum, sulfur) from the Middle East are at risk. German and US car plants could face Asian component delays within weeks. Air freight from South Asia to Europe is up 70% as high-value goods shift from sea to air, squeezing profits.

The conflict has jolted the business community, especially energy firms. France's TotalEnergies has suspended some Gulf production (15% of its global output). Abu Dhabi's Ruwais Refinery is closed after coming under attack, and Kuwait's national oil firm is cutting production due to "force majeure."

Financial markets are volatile. Emerging market currencies – hit by higher oil prices – saw their biggest single-day drop since November 2024. Economist Mohamed El-Erian Tuesday said that as the surge in oil prices feeds a potential inflation spiral, the US recession risk has risen from 25% to 35%, with a longer conflict raising the odds further.

While investors expect long-term oil prices to return to below $70 a barrel (the post-2000 average), uncertainty over high prices has made firms hesitant to expand production, RBC Capital Markets analysts note.