Crude Oil Supply Shock: How the Iran War Threatens Food and Energy Security

Energy Crisis Amplifies Food Security Risks

The escalating conflict involving Iran, and retaliatory actions by the U.S. and Israel, have sent shockwaves through global energy markets, with the immediate focus on crude oil supplies. However, the disruption extends beyond just oil. As tanker traffic through the Strait of Hormuz remains severely constrained since March 1, the crisis poses a significant threat to global food security due to its impact on natural gas and, consequently, nitrogen fertilizer production.

The Gulf region is a critical supplier of nitrogen fertilizer, essential for modern agriculture. Nitrogen fertilizer, derived from natural gas, is vital for crop yields, with roughly half of global food production dependent on it. With approximately 40% to 50% of globally traded urea moving through the Strait of Hormuz, any disruption to this waterway has far-reaching consequences. This means close to one-quarter of globally traded nitrogen fertilizer is now at risk, potentially triggering soaring food prices.

China and India Scramble for Crude

The Strait of Hormuz disruption has placed immense pressure on major oil importers like China and India, who are structurally dependent on Gulf crude. China, while steadily increasing its purchases of Russian oil, still relies on the Gulf for roughly one-third of its crude imports. India, conversely, had been reducing its reliance on Russian barrels due to pressure from Washington, favoring Middle Eastern supplies. With Hormuz traffic stalled, both nations are now looking to Russia to fill the gap.

Notably, two tankers carrying a combined 1.4 million barrels of Russian Urals crude, initially destined for East Asia, have been rerouted to India, highlighting the urgency of the situation. One Suezmax tanker carrying 730,000 barrels has already arrived. India's imports of Russian crude had declined from 1.85 million b/d in November 2025 to 1.06 million b/d in February 2026, but this trend is likely to reverse as the crisis continues.

China's Strategic Reserves

China is also actively bolstering its strategic petroleum reserves as part of its five-year development plan. While specific figures remain undisclosed, the plan involves expanding storage capacity and maintaining crude oil output at around 4 million barrels per day. This proactive approach aims to insulate China from price shocks and supply disruptions. It's estimated that China has been channeling over 1 million bpd into its commercial and strategic inventories throughout 2025, providing some support to global oil prices.

Implications for Traders and Investors

The ongoing crisis presents both risks and opportunities for traders and investors. The disruption in oil supplies is likely to keep upward pressure on crude prices, benefiting oil producers and potentially impacting transportation and energy-intensive industries. Investors should monitor geopolitical developments closely, as any escalation could further exacerbate supply concerns. The impact on food prices also warrants attention, as higher fertilizer costs could lead to increased food inflation and potential shifts in agricultural commodity prices.

Key factors to watch:

• Geopolitical developments in the Middle East
• Tanker traffic through the Strait of Hormuz
• China's strategic reserve build-up
• India's crude oil import patterns
• Nitrogen fertilizer prices and availability