The Effects of the USA/Israel – Iran War on Oil Prices and Implications for agriculture

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Authors: Mr P. Sibiya, Mr T. Nkunjana, and Dr LMV Thindisa

Agricultural Economists at the National Agricultural Marketing Council (NAMC)

Middle East countries such as Saudi Arabia, Iran, Iraq, Kuwait and the United Arab Emirates account for a significant share of global oil production and exports. In 2024, these countries combined, produced approximately 27 million barrels of oil daily, accounting for 26% of global daily oil production. Inherently, geopolitical conflict and instability in this region often have implications for global oil markets and the broader world economy. Uncertainty introduces supply risks that may translate into higher oil prices. 

Beyond oil production, the region also hosts some of the most strategically important maritime routes for global trade. Among these, is the Strait of Hormuz, a narrow shipping passage between Iran and Oman that serve as the main route through which oil and other products to and from the Persian Gulf reaches global markets. The strait connects the Persian Gulf to the Arabian Sea and is a channel to estimated 39% of the seaborne crude oil trade and 19% of natural gas. Disruptions to shipping activity in the Strait of Hormuz therefore poses a direct threat to global oil supply stability.

The recent military activity has caused disruptions to oil flows. As a result, global oil markets have responded with increased volatility and upward pressure on prices. Since the beginning of the conflict late February 2026, crude oil prices have increased significantly, with Brent crude rising from below $80 per barrel to above $100 per barrel and recently exceeding $105 per barrel. Overall, oil prices have increased by more than 30% since the start of the conflict. Whilst South Africa imports a significant portion of its crude oil from Angola and Nigeria, these developments illustrate the sensitivity of global energy markets to geopolitical instability in major oil-producing regions. 

Domestically, an increase of twenty (20) cents per litre in petrol prices, sixty-two (62) cents per litre in diesel and forty-four (44) cents per litre in paraffin prices were recently announced by the Department of Mineral Resources and Energy (DMRE) partly because of higher shipping costs from geopolitical tensions in Middle East region. Consequently, fluctuations in oil prices have a wider economic effect. The transmission of higher fuel prices across the economy may occur through several channels. One of the most immediate effects is the increase in production costs in sectors that rely heavily on energy as input, such as the agricultural sector. There is a strong relationship between energy and food production.  Modern farming systems rely heavily on fuel for mechanized operations, irrigation, processing and transportation. 

The Middle East region is also an important hub for the manufacturing of fertilizers.  South Africa imports eighty percent (80%) of fertilizer requirements from the global markets making it a net importer. At least 25% of South Africa’s 2.5 million tons of fertilizer imports in 2025 came from the Middle East. Majority of this is from Saudi Arabia (43%), Oman (25%) and Qatar (16%). Therefore, increases in energy prices coupled with higher costs of fertilizers are likely to raise the cost of agricultural inputs and production processes thus reduce profitability for producers. In mitigation, the Agriculture and Agro-processing Master Plan (AAMP) motivates for the use of alternatives from green energy sources such as solar, wind, and hydropower. Moreover, reindustrialization of the fertilizer industry for self-sufficiency in at least Nitrogen and Phosphate fertilisers. The triple effect of higher shipping costs, increase in fertilizers, and rising energy prices also create an additional pressure on food prices. 

Shipping costs are expected to increase because of the military activity in the Middle East region. War-risk fees are being applied to shipments to and from the Middle East by major shipping companies like MSC and Maersk. The cost of a 20-foot container is approximately R34,000, while a refrigerated container is about R67,500. Hundreds of dollars in rerouting fees, reefer plug-in points, storage, and other holding fees are additional expenses that exacerbate inefficiency in the food system.

At a domestic level, logistics and transportation represent another important transmission channel. The South African food system relies heavily on road transport to move agricultural products from farms to collation points and then processing facilities, ultimately wholesale and retail markets. Rising fuel prices increase transportation costs throughout the supply chain, from farm to fork. These higher costs are often passed on to consumers through increased food prices. 

The combined effect of these factors contributes to higher food prices and increased food inflation. In South Africa, food inflation has historically been one of the drivers of consumer price inflation. Rising food prices have significant welfare implications because various studies indicate that food expenditure represents a large share (more than 65%) of household budgets, particularly for low-income households. As a result, increases in food prices tend to disproportionately affect poorer households and can exacerbate existing household food insecurity challenges at various levels such as availability, accessibility, nutritional content and the food safety aspects. 

From a food security perspective, the implications are substantial. Higher production and transportation costs may affect the availability of food in certain markets, while rising food prices reduce the affordability of nutritious diets for many households. These pressures can undermine economic access to food and increase vulnerability among already food-insecure populations. Furthermore, persistent volatility in energy markets may introduce additional instability within the food system. The ongoing geopolitical tensions in the Middle East therefore have broader global implications beyond the energy sector.

Geopolitical tensions involving the United States-Israel and Iran highlight the strong interconnections between global energy supply channels, food systems and trade. South is a significant exporter of fruits and vegetables to the Middle East region. The Middle East region accounted for 17%, or R7.8 billion, of South Africa’s R46 billion citrus exports in 2025. Oranges came in at R3.6 billion, lemons at R2.4 billion, mandarins at R1.6 billion, and grapefruit at R106.9 million. Small processed citrus accounted for the remaining balance. 

Similarly, the Middle East received substantial shipments of stone and pome fruit during the 2024–2025 season. The region received exports of about 10% of apples, 12% of nectarines, 17% of plums, 20% of pears, 21% of pears, 34% of peaches, 60% of apricots. Likewise, the Middle East accounted for R130.7 million, or 3%, of South Africa’s R4.3 billion in vegetable exports in 2025.

In conclusion, for South Africa, which is heavily reliant on imported energy, rising oil prices represent a significant risk not only to economic growth and development but to food security as well. In mitigation, the National Department of Agriculture is in continuous discussions with Department of Minerals Resources and Energy (DMRE) for cogent and viable approaches to mitigate the effects of high fuel prices on the agricultural sector. Additionally, the Department will continue to advocate for the expansion of the fuel rebate system to farmers as per policy interventions in the AAMP. Further, the Department and the NAMC will continue to implement the farmer support initiatives through transformation funds from the levies system, the Comprehensive Agricultural Support Programme (CASP) and others. Last, the Department will aggressively diversify its export market catalogue to mitigate the global uncertainty.

Disclaimer: The views expressed in this article is solely that of authour, and does not necessarily reflect the views of Mzansi Agriculture Talk, their employers, or other associated parties.