"We Only Eat Once A Day": How The Iran War Hits Asia's Food Supply | Insight

Key Concepts

• Strait of Hormuz: A critical maritime chokepoint for global energy and commodity transit, currently closed due to the Iran-US conflict.
• Steam Methane Reforming: The industrial process used to convert natural gas into hydrogen, which is then combined with nitrogen to produce ammonia and urea (fertilizer).
• Force Majeure: A legal clause that excuses a party from performing their contractual obligations due to an unforeseeable event (e.g., war).
• Long-tail Crisis: A situation where the negative impacts persist long after the initial conflict ends due to infrastructure damage and supply chain disruption.
• Boro/Kharif/Aman Seasons: Specific agricultural crop cycles in South Asia that are currently threatened by input shortages.
• Energy/Food Inflation: The cascading economic effect where rising fuel and fertilizer costs lead to higher food prices and reduced household purchasing power.

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1. The Impact of the Strait of Hormuz Closure

The closure of the Strait of Hormuz, initiated by Iran on March 4th in retaliation to US/Israeli strikes, has paralyzed global supply chains.

• Shipping Traffic: Tanker traffic has plummeted by over 90%, from approximately 250 tankers per day to fewer than 20.
• Energy Infrastructure: Missile and drone strikes on facilities like Qatar’s Ras Laffan have disrupted 20% of the world’s LNG supply. Restoration of these facilities is estimated to take at least four years.
• Economic Consequences: The conflict has created a "geopolitical price premium," with oil prices expected to hover near $100/barrel in the near term.

2. Disruption to Agriculture and Fertilizer Supply

Fertilizer is the most critical commodity impacted, as it cannot be easily substituted like fuel.

• Production Bottlenecks: Fertilizer production relies heavily on natural gas (LNG). In Bangladesh, the shortage of LNG forced the closure of five out of six government-managed fertilizer plants.
• Price Hikes: Urea prices have doubled, rising from ~$490/ton to $950–$1,000/ton. On average, fertilizer prices globally have increased by 40–50%.
• Regional Vulnerability:
  • Bangladesh: Imports 80% of its fertilizer; 33% of these imports flow through the Persian Gulf.
  • India: The world’s second-largest fertilizer user. While it has prioritized gas for domestic production, it remains heavily dependent on imports for phosphorus and potassium.
• Long-term Outlook: A study by the International Food Policy Research Institute suggests that if the Strait remains blocked through 2026, fertilizer prices may not return to pre-crisis levels until 2027.

3. Socio-Economic Consequences in Asia

The conflict is triggering a potential food shock across Asia, affecting the most vulnerable populations.

• Food Security: The World Food Program estimates that 9.1 million people in Asia could be pushed into severe hunger if the conflict persists.
• Household Impact: In countries like the Philippines and India, where food accounts for 30–50% of household budgets, rising costs are forcing families to cut back on health and education expenses.
• Fisheries Crisis: In the Philippines, rising fuel costs have made it unprofitable for subsistence fishermen to operate. Employment in the sector dropped by 450,000 between February and March, and production fell by over 15%.
• Political Instability: Governments are forced to intervene with subsidies, worsening fiscal positions and potentially leading to political unrest as the cost of living rises.

4. Mitigation Strategies and Challenges

Countries are attempting to adapt, though success is limited by structural constraints:

• Diversification: Nations are seeking non-Middle Eastern suppliers (Latin America, North America, Australia) and pushing for renewable energy and nuclear power to reduce fossil fuel dependence.
• Strategic Buffers: There is a renewed focus on building strategic reserves, though many developing nations lack the infrastructure to maintain long-term stockpiles.
• Regional Cooperation: ASEAN is discussing the "Petroleum Security Agreement" and an "ASEAN Power Grid," though experts remain skeptical about the feasibility of these projects due to internal connectivity issues and the urgency of the crisis.

5. Notable Quotes

• "Unlike oil, where a number of countries do maintain some strategic reserves... you can't substitute fertilizer for some other products, which is feasible in the case of oil." — Highlighting the unique vulnerability of the agricultural sector.
• "If the war persists, it can have long-term effects that would be difficult to reverse on health, nutrition, and other human welfare markers." — Emphasizing the human cost of the crisis.
• "We are in a new normal in terms of the situation in West Asia right now. Clearly, geopolitical risk has heightened." — Reflecting the consensus that the conflict will have lasting structural impacts.

Synthesis

The war on Iran has evolved into a "long-tail crisis" that transcends simple fuel shortages. By choking the Strait of Hormuz, the conflict has crippled the global fertilizer supply chain, threatening the agricultural output of major Asian economies. With infrastructure damage requiring years to repair and shipping insurance premiums soaring, the region faces a sustained period of food inflation and economic instability. While governments are attempting to pivot toward alternative energy sources and supply chains, the immediate reality is a deepening food security crisis that disproportionately affects low-income households and subsistence workers.