The potential prolongation of conflict involving the United States, Israel, and Iran is casting a shadow over global economic growth prospects for this year and next. The disruption of maritime traffic through the Strait of Hormuz is evolving from an energy crisis into a systemic threat to global food security and the cost of living.
Beyond the immediate impact on oil and Liquefied Petroleum Gas (LPG), the Food and Agriculture Organization (FAO) warns that uncertainty surrounding this vital corridor is causing sharp price fluctuations and threatening supplies of essential raw materials—including chemical fertilizers, phosphates, ammonia, and sulfuric acid—that underpin global food production. This volatile situation poses a direct and significant risk to the economic stability of both Iraq and the Kurdistan Region.
According to the World Bank Group, a rise in oil and gas prices inevitably drives up the cost of other goods. In March, the Energy Index rose by 41.6 percent, food prices increased by 2.7 percent, and chemical fertilizers climbed by 26.2 percent.
This surge significantly impacts agricultural yields and food prices for months to come. Current market uncertainty forces farmers to scale back planting due to high costs or sell their produce at significantly higher prices.
The cost of living increases and food shortages will have varying consequences globally. While developed nations will face economic strain, in low-income and developing countries, these conditions lead to famine and increased poverty.
Iraq and Kurdistan Region: Strategic vulnerability
In a ranking of 226 global economies, Iraq holds the 57th position in imports and 39th in exports. While Iraq is a leading global exporter, this is not a reassuring indicator; 99.7 percent of its exports consist of oil and its derivatives. This demonstrates a total reliance on a single revenue source, even as the country imports almost all types of goods and services—including food and even refined petroleum products.
This lack of diversity makes Iraq heavily dependent on foreign markets to meet domestic food needs. Consequently, global price hikes reflect immediately in local markets. This has already affected fruit and vegetable prices in the wholesale markets (locally known as “Alwa”) of Sulaimani and Erbil, which serve as the primary distribution hubs for the Kurdistan Region and central/southern Iraq.
The continued closure of the Strait of Hormuz is more than an energy price shock; it is a “cascading shock” to the global food system. Maximo Torero stated that Gulf countries provide nearly half of the world’s sulfur trade—a key component for sulfuric acid, chemical fertilizers, and phosphates on which global food and agricultural production depends.
Shipping data through the Strait this year highlights the severity of the crisis. Before the war, an average of 84 ships passed through daily. During active conflict, that number fell to five ships per day, and during the ceasefire it rose only slightly to seven. According to the latest data from the International Monetary Fund and Oxford Port Watch, only two ships passed through on April 20. Overall, the volume of vessels carrying oil, gas, and other goods has fallen by 92 percent compared to pre-war levels.
Data from the Central Bank of Iraq shows that Iraq’s annual import spending nearly matches its oil export revenue. Among the 1,001 categories of goods Iraq imports, food ranks third after vehicles and electronics.
In 2024, Iraq imported:
Rice: $1.64 billion
White flour: $456 million
Wheat: $265 million
Tea: $237 million
Local market impact: Erbil and Sulaimani
The World Bank’s April report shows a rise in nearly all indices: energy (Brent, Texas, Natural Gas), food (wheat, rice, meat), and fertilizers. Conversely, only the index for beverages (coffee, tea, cocoa) saw a decrease.
In local markets, the price of fruits and vegetables saw significant shifts in March. In Erbil, prices for items like tomatoes, bananas, and cucumbers rose by 18 percent to 50 percent. In Sulaimani, similar products saw fluctuations ranging from 4 percent to 78 percent. These changes directly reflect global market shifts, even before the full "shock" of the global raw material shortage has fully hit factories and farms.
The new reality of the Strait of Hormuz affects Iraq and the Kurdistan Region on both ends. Iraq has lost the ability to export 80 percent of its oil and currently exports only one-seventh of its pre-war volume. Simultaneously, the cost of importing essential goods via this route has skyrocketed.
While the two-week ceasefire between the US and Iran (currently extended indefinitely) briefly slowed the price surge, the ongoing uncertainty in the Strait of Hormuz will continue to drive global food shortages. For Iraq, the lack of alternative export routes and dwindling revenue threatens to increase poverty, reduce job opportunities as projects stall, and drive cost of living rise to record levels.
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