As the crisis in the Strait of Hormuz continues without a sustainable solution, there are clear indications that the impact will spill into realms beyond energy supply. The price of fertilizer, for instance, is already increasing, which will in turn affect global food prices in the near future.
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| Rise in fertilizer price |
In another development, reports from Brazil indicate that sugarcane farmers have seen an opportunity to capitalize on ethanol production during the present crisis. Brazil usually supplies around 45% of global sugar trade; however, mill owners can decide how much of the sugarcane harvest is diverted to ethanol versus sugar production. This is purely a matter of business rather than politics or emotion.
Brazil uses ethanol to increase its gasoline blend, with plans to increase that blend from 30% to 35%. In the current circumstances, analysts fear that the South American nation could reduce the proportion of sugarcane used for sugar production from 50.7% in 2025 to 48.5% this year. Falling global sugar consumption due to health concerns provides little incentive for Brazilian farmers to reverse this process.
In the crude oil markets, meanwhile prices for both WTI and Brent rose significantly on Wednesday in response to stakeholder rhetoric.
Brazil uses ethanol to increase its gasoline blend, with plans to increase that blend from 30% to 35%. In the current circumstances, analysts fear that the South American nation could reduce the proportion of sugarcane used for sugar production from 50.7% in 2025 to 48.5% this year. Falling global sugar consumption due to health concerns provides little incentive for Brazilian farmers to reverse this process.
In the crude oil markets, meanwhile prices for both WTI and Brent rose significantly on Wednesday in response to stakeholder rhetoric.
As of 17:00 GMT on Thursday, the prices of WTI and Brent stood at $105.70 and $110.40 respectively - a clear rise in prices.
The potential impact on Iranian oil production and storage due to a closure of the Strait of Hormuz worries analysts, as the absence of Iranian oil cannot be easily ignored.
Although Iran remains under strict international sanctions, a "shadow fleet" of huge tankers has been active in supplying Iranian oil to energy markets; as it emerged a few days ago, some of these tankers are as big as the U.S. aircraft carriers. This means the Iranian share of supply—even through by illicit means—has contributed to maintaining global price stability.
Consequently, the absence of Iranian oil is a loss that other producers may struggle to compensate for. In this context, the departure of the UAE from OPEC indicates a desire to increase production while exploiting improved infrastructure; the UAE’s national oil company has been attracting foreign investors specifically to advance these interests.
Regarding OPEC, the departure of the UAE has cast a cloud of uncertainty over the cartel. While key members are working to maintain unity, their primary reassurance has been a commitment from Russia to remain in the group, at least for the time being.
This convergence of energy volatility and agricultural shifts creates a precarious "double squeeze" on the global economy. As the Strait of Hormuz remains a primary chokepoint for both fuel and fertilizer, the decisions made in Brazilian sugar mills are no longer just local agricultural choices—they are a critical component of a tightening global supply chain that threatens to keep both energy and food prices at record highs.
Consequently, the absence of Iranian oil is a loss that other producers may struggle to compensate for. In this context, the departure of the UAE from OPEC indicates a desire to increase production while exploiting improved infrastructure; the UAE’s national oil company has been attracting foreign investors specifically to advance these interests.
Regarding OPEC, the departure of the UAE has cast a cloud of uncertainty over the cartel. While key members are working to maintain unity, their primary reassurance has been a commitment from Russia to remain in the group, at least for the time being.
This convergence of energy volatility and agricultural shifts creates a precarious "double squeeze" on the global economy. As the Strait of Hormuz remains a primary chokepoint for both fuel and fertilizer, the decisions made in Brazilian sugar mills are no longer just local agricultural choices—they are a critical component of a tightening global supply chain that threatens to keep both energy and food prices at record highs.
