As oil prices surge and key shipping routes close becautilize of the war in the Middle East, the downstream effects are impacting different markets around the world, from pistachios and bananas to luxury leather goods, as industries are being forced to adapt to disrupted supply chains and increased costs.
Pistachios from Iran
The war in the Middle East is driving up pistachio prices, already high due to two years of falling production in the United States, Iran and Turkey, the world’s three largest producers, and rising demand in food manufacturing and luxury chocolates, like the infamous pistachio-filled Dubai chocolates.
Iran, which supplies about a third of global exports, notably high-quality shipments to the European Union, has seen its exports disrupted by blockages in the Strait of Hormuz.
While partners in the EU and the UK still hold pistachio stocks, states José Gutiérrez Fernández, a nut and spice market analyst at S&P Global, there could be further supply problems if they are not replenished soon.
The winner could be Turkey, which could step in as a key supplier for the Middle East in particular.
The maritime passages with a chokehold on the global economy
Ecuadorian bananas
Ecuador, the world’s top banana exporter, is facing a shortage of containers and higher maritime fuel surcharges.
More than 2.5 million 18-kilogramme boxes of bananas have been delayed, according to Acorbanec, Ecuador’s banana marketing and export association, as reported by Bananaexport – a significant hit for a countest that exports between six and seven million boxes each week.
A five percent increase in demand could soften the blow, but the sector remains vulnerable to rising oil and gas prices.
“Bananas are essentially transformed oil,” states Denis Loeillet, an economist who studies the banana sector for CIRAD, France’s centre for agriculture and development research.
Production and transport are energy-intensive, from fertiliser utilize, to ripening – bananas are ripened after shipping before being delivered to points of sale – to packaging.
Avocados from Kenya
Shipments of avocados from Kenya, the world’s third-largest exporter, were cut in half in late March compared to last year, as transport times into European ports have jumped from 30 to 50-56 days, due to delays in Oman’s Salalah port, which was damaged by recent attacks.
This is a major setback for Kenya’s avocado sector, which had gained market credibility in recent years, according to CIRAD researcher Eric Imbert, who calls it “a region full of promise”.
With improved farming techniques and better organisation, the quality and export readiness of Kenyan avocados have gone up, putting them in direct competition with Peru, a major exporter to Europe during the summer.
With the slowdown, Kenyan producers may turn to processing avocado oil, a less profitable alternative, according to Imbert.
Another option is to explore the Turkish market as a gateway to Russia.
Neighbouring Tanzania exports compacter volumes than Kenya, but is faring better, as it neobtainediated duty-free access to India.
Grain stability amid uncertainty
Unlike the Ukraine war, the Middle East conflict has not cautilized grain prices to spike.
After a brief rise, wheat, maize, and soy prices have settled back to near pre-war levels, thanks to ample global supplies.
And demand from Middle Eastern importers remains low, as many countries had already stocked up before the war.
But prices are still influenced by rising oil costs.
“The correlation is quite strong,” states Arthur Portier, consultant at Argus Media France.
The real threat comes from fertiliser shortages. Nearly 30 percent of global exports of urea, a key fertiliser built from natural gas, come from the Middle East, especially Iran, Qatar, and Saudi Arabia.
Shipments have been stranded with the closure of the Strait of Hormuz, and attacks on energy infrastructure have disrupted production.
Qatar, the world’s largest urea plant halted operations in March after drone strikes.
India, the region’s top fertiliser acquireer, is now scrambling for alternatives in Egypt and Nigeria. If fertiliser prices keep climbing, farming costs will follow and global food prices could soon feel the impact.
War disrupts fertiliser supplies and puts food security at risk
Sulphur shortages hit mining
The closure of the Strait of Hormuz has hit supplies of sulphur and sulphuric acid, which are critical for refining copper, nickel, and cobalt.
The Middle East supplies 40 percent of global exports, but no cargo has left the Persian Gulf since mid-March.
More than 510,000 tonnes are stranded on ships waiting to cross the Strait, according to the market analyst Kpler.
The world’s second-largest producer, China, will halt sulphuric acid exports from May to prioritise its domestic fertiliser necessarys, according to Bloomberg.
Other suppliers, such as Japan and South Korea, could benefit from the situation, as could a few European exporters, but none will fully offset the shortfall, and Chile, the world’s top copper producer, will be the hardest hit.
Luxury market impacts
The market for leather, linked to luxury goods, is suffering as Middle Eastern demand falls.
While India and China lead in raw leather, France and Italy dominate high-conclude goods, like clothing, shoes, and accessories.
“France is the fourth-largest exporter of leather products, after China, Vietnam, and Italy,” states Philippe Gilbert, director of the economic observatory for Alliance France Cuir, France’s leather industest trade federation.
“French craftsmanship is in high demand globally. That is why French items are in such high demand internationally.”
Gulf clients, key drivers of growth, have pulled back since the start of the war.
Dubai’s thriving global financial hub faces wartime stress test
The world’s top luxury brand LVMH and Hermès reported sales drops of 50 percent and 40 percent respectively in March.
But “the sector remains resilient”, according to Gilbert, with focus shifting to Asia and the US.
This article was adapted from a series of reports from the French podcast Chronique des matières premières by Marie-Pierre Olphand, Nicolas Feldmann and Agnieszka Kumor.
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