Spillover Effect
Summary
The war in Iran threatens to unleash a fresh food-price shock across the developing world by disrupting a supply route of immense global importance. With the Strait of Hormuz carrying roughly 30 per cent of the world’s traded fertilisers, Tehran’s interference has already raised fears of a severe supply squeeze, with Bank of America warning that as much as 65 to 70 per cent of global urea supplies could be at risk. Fertiliser prices have reportedly climbed by 30 to 40 per cent, while Kenya’s own fertiliser costs had already risen by about 40 per cent. At the same time, benchmark oil and gas prices have surged by more than 50 per cent since the conflict began, compounding the cost of cultivation, transport, and food production. This is particularly alarming for poorer nations, where food and fuel account for around 30 to 50 per cent of the consumer inflation basket, compared with less than a quarter in most developed economies. Should the disruption persist, countries such as Somalia, Bangladesh, Kenya, and Pakistan, all heavily dependent on Gulf fertiliser supplies and lacking substantial reserves, may see falling yields in staple crops such as wheat and corn, with the effects eventually rippling through to the prices of bread, meat, eggs, and dairy.
Application
More broadly, this illustrates how globalisation creates powerful spillover effects, such that a conflict confined to one region rarely remains that region’s burden alone. In an interconnected world, supply chains for energy, fertiliser, food, and finance stretch across borders, binding distant economies into a single web of dependence. As a result, when war disrupts a chokepoint such as the Strait of Hormuz, the consequences are not borne solely by those fighting it; they are transmitted outward through higher transport costs, scarcer agricultural inputs, and rising consumer prices in countries far removed from the battlefield. The hardship of one region thus becomes an imported burden for another, with vulnerable states often paying the heaviest price despite having played no part in the original conflict.