Energy Shock from Iran Conflict Has Limited Impact on Food Prices
Historical Context of Oil Crises
On July 11, 2008, Brent crude prices reached a record $147.5 per barrel, causing significant inflation in fuel and food prices globally. The United Nations’ Food and Agriculture Organization (FAO) Food Price Index reflected a drastic increase, showing double-digit inflation for 22 consecutive months between November 2006 and August 2008, with an average increase of 34.8%. A similar trend was observed following Russia’s invasion of Ukraine in late February 2022, when Brent crude prices rose to $139.13 per barrel on March 7, 2022, leading to double-digit inflation in the FAO index for 19 months and an average year-on-year increase of 26.8% from January 2021 to July 2022.
Current Energy Crisis Overview
The ongoing conflict between the United States-Israel and Iran has resulted in significant increases in Brent crude prices, which rose from an average of $64.6 per barrel in January and $69.2 in February to $98.2 in March 2026, peaking at $119.5 on March 9. As of last week, Brent closed at $95.2 per barrel amid a fragile ceasefire that has existed since April 8, with the Strait of Hormuz still closed to most oil and gas shipments. However, unlike previous oil crises, there has not been a simultaneous rise in international food prices.
Comparative Analysis of Food Prices
In March 2026, the FAO index stood at 128.5 points, showing an increase of barely 1% from the same month the previous year. In contrast, since September 2025, annual food price index inflation has been negative or reported low single-digit increases. This starkly contrasts the high double-digit inflation seen in 2021-22. Current export prices of wheat from Argentina, the European Union, and Russia are quoted at $230, $238, and $239 per tonne, respectively, down from $248, $247, and $254 a year ago. Similarly, Indian rice exports are priced at around $367 per tonne compared to $372 last year, with notable declines also from Thailand and Pakistan.
Prices for corn have also decreased, with figures showing drops from $219 to $209 for Argentina and $240 to $227 for Ukraine, while the U.S. and Brazil saw marginal increases. Additionally, raw sugar prices in New York have significantly decreased to 13.75 cents per pound from 18.1 cents last year, while the FAO dairy price subindex fell 18.7% from its previous year’s level. The only notable increase has been in edible oils, where prices for crude palm oil and soyabean oil have risen.
Factors Influencing Current Price Dynamics
One of the key reasons for the current stability in food prices is the robust global production of major commodities. The U.S. Department of Agriculture estimates record outputs for wheat, corn, oilseeds, and sugar at 844.2 million tonnes, 1,301.1 million tonnes, 698.2 million tonnes, and 189.3 million tonnes, respectively, for the 2025-26 period. Global rice stocks are also predicted to reach an all-time high of 192.3 million tonnes.
This situation contrasts sharply with the 2007-08 period, when supply shortages and shifts towards biofuels led to escalating food prices. The same pattern was evident in 2022, where food prices rallied alongside crude oil due to post-COVID demand recovery exacerbated by the Russia-Ukraine conflict.
Potential Future Risks for Food Prices
Despite the current stability in food prices, there are concerns about potential price increases due to two primary factors. The first is cost-push inflation stemming from the Iran conflict and the associated energy shock, which influences the availability and costs of agricultural inputs like fertilizers. Fertilizers such as urea and di-ammonium phosphate have seen price increases, which could impact agricultural yields and acres planted in the upcoming planting seasons in the U.S. and India.
The second concern revolves around the potential redirection of crops for biofuel production. High crude prices may incentivize the diversion of key crops like corn and sugar for ethanol production. Indonesia’s aggressive biofuel mandates, which require a significant increase in diesel blending with palm oil, further illustrate this risk. The ongoing energy crisis, considered one of the most significant since the 1970s, could ultimately determine the trajectory of future food prices.
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