As US and Israel strike Iran, concerns mount about potential Strait of Hormuz closure and resulting economic impacts that could significantly affect the fresh produce sector
The dramatic escalation of conflict in the Middle East has the potential to affect the fresh produce business negatively in a number of ways, according to one of the industry’s leading analysts.
After the US and Israel carried out air strikes on a number of targets in Iran, fears have been raised about a possible escalation in hostilities that might potentially see Tehran close the strait of Hormuz in the Persian Gulf – a vital international shipping lane through which one-fifth of the world’s oil is supplied.
While such a response is by no means certain, it has already been approved by Iran’s parliament, and would be a major shock to global energy markets that would harm the economy.
“That would result in a new wave of inflation,” said Cindy van Rijswick, global strategist for fruit, vegetables and floriculture at RaboResearch Food & Agribusiness.
“Higher oil and natural gas prices would lead to higher costs in logistics, packaging, fertilisers, heating in glasshouses and various other inputs,” she added. “And there are potentially many indirect effects. As higher oil prices will lead to higher inflation, consumer budgets would be impacted, potentially resulting in changing fruit and veg purchases.”
Meanwhile, the head of the International Monetary Fund Kristalina Georgieva has also warned that strikes on Iran could dampen economic growth worldwide.
“There could be secondary and tertiary impacts,” she told Bloomberg TV. “Let’s say there is more turbulence that goes into hitting growth prospects in large economies – then you have a trigger impact of downward revisions in prospects for global growth.”
