By Sylvain Charlebois

The conflict in the Middle East could soon show up on your grocery bills.

The reason is simple: the Strait of Hormuz moves a huge share of the world’s oil, natural gas and fertilizer, and any disruption there quickly raises the cost of producing and transporting food.

The Strait, a narrow waterway between Iran, the United Arab Emirates and Oman, is one of the most important shipping routes of the global economy. Roughly 20 per cent of global oil supply, 23 per cent of natural gas, and about 30 per cent of global chemical fertilizers move through that corridor each year.

Even countries that produce their own energy, such as Canada, are affected because global oil prices are set in international markets.

Unlike Russia’s illegal invasion of Ukraine four years ago—when markets worried about access to wheat and grains—this conflict is about the cost of energy and producing food.

Fertilizer markets are particularly vulnerable. The Middle East is a major exporter of urea and ammonia, both critical for global crop production. Any sustained disruption will push input costs higher.

Shipping through the Strait has largely halted. Cargo operators are wary, and insurers are raising war-risk premiums. When insurance disappears, ships often do too.

Canadian farmers try to shield themselves from volatility by pre-buying inputs months ahead. But they are not fully protected. Some fertilizer is locked in early, but other purchases remain exposed to global price swings. Diesel is the real wild card, because it powers farm machinery, long-haul trucking, rail transport and much of the equipment used in food processing and distribution.

Energy markets have already reacted. Oil is up about 13 per cent since Monday. Natural gas prices in some regions have jumped 30 per cent. Diesel prices are climbing between eight and 13 per cent. Agricultural commodities—wheat, soybeans, milk—are edging upward, but markets are not panicking.

If diesel were to spike 25 per cent under a prolonged Iran conflict scenario, the effect on food inflation could be noticeable. Canada’s industrial carbon price applies to large emitters such as energy producers, heavy industry and major transport networks and will rise from $95 last year to $110 per tonne this year.

Dalhousie University’s Agri-Food Analytics Lab models suggest this combination could add 0.4 to 0.7 percentage points to national food inflation by May or June. That may not sound dramatic. But every percentage point of food inflation translates into roughly $150 to $200 more in annual food spending for the average Canadian household. Fresh produce and meat would likely feel the pressure most.

And Canadians are already under strain. According to the latest data from Statistics Canada, food prices are currently rising at 7.3 per cent year over year, far above the country’s overall inflation rate of about 2.3 per cent.

Fuel used across the food system, from farm equipment to trucks, rail and processing facilities, is also subject to other levies, including federal excise taxes, provincial fuel taxes, and sales taxes such as GST or HST applied to fuel purchases. Despite exemptions, these levies still increase transactional costs for everyone involved in food distribution in Canada.

Individually, these costs may appear manageable. But together they compound.

Still, energy shocks alone rarely drive long-term food inflation. Exchange rates, labour costs, and global commodity markets typically matter far more. What matters most now is duration.

If the conflict fades quickly, the market impact will likely remain limited. If it drags on, costs will ripple through global supply chains.

Dr. Sylvain Charlebois is senior director of the Agri-Food Analytics Lab at Dalhousie University and co-host of The Food Professor Podcast.