By Aya S. Chacar
The global energy crisis caused by the closure of the Strait of Hormuz is only the beginning of the economic cost of the war with Iran.
I study how institutions affect businesses and supply chains, and I expect food prices to rise next, with high prices lasting even after whatever point hostilities end.
Along with about 20% of the world’s crude oil trade and a similar share of the world’s liquefied natural gas shipments, shipping traffic through the strait also carries roughly a third of internationally traded fertilizer, which is key to bountiful crops around the world.
Modern agriculture depends on precise timing of delivering nutrients to plants. When fertilizer arrives late or becomes too expensive to buy in sufficient quantities, farmers are left to either reduce the amount they use, plant fewer crops or switch to crops that need less fertilizer. Each option reduces overall productivity, cutting supplies of basic foods, feed for livestock and key ingredients used in a wide range of food products.