S& P Global analysis suggests that in addition to the well-known impacts of the obstruction of traffic through the Strait of Hormuz, deeper consequences may be brewing a global food crisis.
This first important report, coming from S& P Global Institute, was authored by Daniel Yergin, Shankari Srinivasan, Allan Pickett, and Simon Blakey. The authors indicate that higher costs of energy and fertilizers, a still strong demand for biofuels, and weather risks related to El Niño are beginning to emerge.
They wrote, "Global food producers rely on a stable supply of natural gas and sulfur to produce fertilizers, on diesel to power machinery and transportation, and on open sea lanes for trade. Conflicts are now testing all of these aspects at the same time, and El Niño is adding to the challenges."
This report, titled "Energy Disruptions and El Niño: Could They Lead to a Global Food Crisis?", points out that "pressure is building in the fertilizer and diesel markets." The article reflects the comprehensive professional capabilities of S& P Global's agricultural and energy research services, as well as the research findings of S& P Global Ratings.
Fertilizer supply is disrupted.
Although it is widely known that before the outbreak of wars, approximately 20% of the global oil supply and 20% of liquefied natural gas ( LNG ) trade passed through the Strait of Hormuz, what is less noted is that the Middle East is also an important supplier of fertilizers and the raw materials required for other countries to produce fertilizers.
Approximately 29% of the world's most commonly used nitrogen fertilizer, urea, is traded internationally via the Strait of Hormuz, as is nearly half of the global sulfur trade and about 21% of the ammonia maritime trade.
However, the author indicates that the disruption in fertilizer supply is just the first conduit through which the effects of the war in Iran impact global agriculture. Fertilizer producers in other regions also rely on energy, primarily natural gas, which is used both as a raw material and as fuel in the manufacturing process. By restricting the flow of oil and LNG through the Strait of Hormuz, this conflict has also pushed up the costs of fertilizer production and farm operations beyond the Gulf region.
The author points out that South Asia is particularly exposed to dual vulnerabilities: on one hand, there are disruptions in the supply of fertilizers from the Gulf, and on the other hand, the costs of LNG used by domestic producers have risen. Gulf producers are an important source of urea imports for India, while LNG supports about 85% of India's domestic urea production. In Bangladesh, due to a shortage of available LNG, four out of five urea factories in the country have ceased operations since March 2026.
Diesel shortage further squeezes the agricultural economy
Diesel fuel is an important operating cost for farmers, and the global shortage of diesel supply also affects regions that might have been better able to withstand the impacts of chemical fertilizers and LNG.
The Middle East and Russia together typically account for half of the world's net diesel exports. Since July 2025, diesel exports from the Middle East have declined by more than half from their peak, to less than 1 million barrels per day by July 2026. Meanwhile, drone attacks in Ukraine and export bans have reduced Russian diesel exports from around 1 million barrels per day to nearly zero. China has also tightened restrictions on diesel and aviation fuel exports.
With the remaining refining capacity approaching its operational limits, reduced supply and low inventories, coupled with seasonal harvests and winter heating demands, have further exacerbated the pressure. The price difference between crude oil and diesel (which historically ranged between $12 and $20 per barrel) rose to over $100 per barrel in the first week of September.
The author writes, "The conflict has driven up diesel prices at a much faster rate than crude oil prices, which has caused farmers to face a sharp increase in operating costs. Faced with these rising costs, coupled with more expensive fertilizers, farmers in the most affected areas have either reduced their purchases and application of fertilizers or decreased the area they plant. In either case, the amount of grain produced will ultimately be less than what could have been produced."
Biom fuels exacerbate the trade-off between ‘food or fuel’
High oil prices have also made biofuels more competitive compared to petroleum, thereby increasing the demand for crops and vegetable oils used in biofuel production. In September 2026, biofuels were cheaper than petroleum-based shipping fuels in Europe for the first time in recorded history. Continuous demand and policy support mean that it is more difficult for the agricultural products market to rebalance back to food production.
The author writes, "Therefore, the role of biofuel policies is not merely to support demand. It is influencing what farmers plant right in the heart of the cost shock."
El Niño superimposed on input cost shocks
The anticipated strong El Niño phenomenon is expected to further exacerbate the pressures faced by farmers, who are already dealing with higher costs of fertilizers and fuel. This will make it more difficult for crops to withstand high temperatures and destructive rainfall. The National Oceanic and Atmospheric Administration (NOAA) predicts that sea surface temperatures will be at least 2 degrees Celsius higher than average – only seven events since the 1950s have reached this threshold.
The agricultural model of S& P Global currently shows:
- Brazil's corn production forecast has been lowered by 6 million tons to 137 million tons; if El Niño further intensifies, production could decrease by another 10 million tons.
- Australian wheat production is likely to fall to 22 million tons, compared to the current forecast of 28 million tons.
- If the insufficient monsoon rainfall persists, India's Rabi season wheat crops face greater downside risks; rainfall in September was about 14% lower than the average level.
- The forecast for Brazil's soybean production has been lowered by 6 million tons to 177 million tons. After incorporating the intensity of El Niño and reduced phosphorus fertilizer application into the model, the weighted probability estimate is 168 million tons, with a 65% probability that production will fall between 160 million and 170 million tons. This impact will be felt globally, as Brazilian soybeans are an important source of livestock feed for China.
- Indonesia and Malaysia face downward risks of 5.8 million tons and 2.5 million tons in palm oil production respectively.
The author indicates that, unlike changes in oil prices which are immediately reflected, the impact on food supplies takes time to become apparent, and the ultimate extent and severity of these effects are still uncertain:
Farmers purchase seeds, fertilizers, and fuel months in advance of selling their crops. Therefore, the pressures currently weighing on farm budgets may not fully be reflected in the food market until 2027.
The global food crisis is not inevitable. But it is no longer a distant risk either. If wars continue to hinder the flow of energy and fertilizers, and if weather conditions reduce harvests in major production areas, then all the elements of this crisis will gradually come together.
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