Fertilizer Shock Threatens Food Price Spiral as Middle East Conflict Strains Supply Chains
The World Bank has warned that fertilizer prices are set to surge this year as the Middle East conflict disrupts energy markets and supply chains, threatening a food price spiral that would hit developing economies hardest. The bank June 2026 Global Economic Prospects report projects Brent crude will average $94 a barrel in 2026, some 36 percent above 2025 levels, with knock-on effects rippling through fertilizer production and agricultural markets.
The warning cuts to the heart of a vulnerability that policymakers have understood for years but failed to address. Natural gas accounts for up to 80 percent of the cost of producing nitrogen fertilizer, and the Strait of Hormuz disruption has sent gas prices climbing across Asia and Europe. With fertilizer supply already tight after years of conflict-related disruptions, the World Bank sees food price inflation accelerating through 2026 and into 2027.
The Fertilizer-to-Food Transmission Channel
The mechanism is well established in agricultural economics. Higher natural gas prices raise fertilizer production costs, which push fertilizer prices up, which raise the cost of growing food, which eventually lands on consumer grocery bills. The lag between a fertilizer price shock and consumer food inflation typically runs six to twelve months, meaning the energy disruption from the Middle East conflict will keep pressing food prices upward well into 2027.
Sub-Saharan Africa faces the most immediate danger. The region imports roughly 40 percent of its fertilizer, and the World Bank report highlights that its biggest economic pressures are coming through inflation, including high food prices driven by fertilizer supply shortages and price hikes. For economies where food can account for over half of household spending, even modest price increases translate into significant welfare losses.
The bank notes that developing economies have faced a series of challenges over the last decade, and the current shock is testing whether the policy frameworks built after previous crises can absorb another blow. The question is whether governments can protect vulnerable populations today without sacrificing the investments needed for long-term food security.
The Fiscal Buffer Problem
A central finding of the report is that many developing economies enter this crisis with depleted fiscal buffers. About two-thirds of developing economies, and nearly 90 percent of low-income countries, are commodity exporters. These economies tend to have weaker fiscal positions than their peers, with more volatile and less diversified revenue streams.
The World Bank analysis of fiscal behavior during commodity price booms delivers an uncomfortable verdict. Five years after a positive commodity price shock, much of the revenue windfall is spent rather than saved to strengthen fiscal positions. This pattern leaves governments with little room to subsidize food or fertilizer when the next shock arrives. The report recommends well-designed fiscal rules, sovereign wealth funds with clear stabilization mandates, improved domestic revenue mobilization, and greater economic diversification as the structural fixes needed to break the cycle.
Since 2010, aggregate government debt in developing economies has climbed from under 40 percent of GDP to over 70 percent. The more indebted a country already is, the more sharply its borrowing costs rise with additional debt. For countries now facing a fertilizer-driven food crisis, the cost of emergency spending will be higher precisely because their fiscal positions have deteriorated.
The World Bank Response and the Downside Risk
The World Bank Group is moving quickly to deploy financing. It is immediately making up to $50 to $60 billion available through existing instruments, including $25 billion of pre-arranged financing, to support social safety nets, boost fiscal capacity, and provide working capital for firms and farms. Over 30 countries are already working with the bank to enhance readiness. If the conflict persists, the bank can scale up to $80 to $100 billion over 15 months.
The stakes are considerable. The report baseline forecast already assumes the worst energy disruptions abate by July. If they do not, and if financial stress accompanies the energy shock, global growth could fall to just 1.3 percent in 2026 and inflation could rise to 4.4 percent. Under that scenario, the fertilizer-to-food transmission channel would intensify rather than fade, and the fiscal buffer problem would become a fiscal crisis for the most vulnerable commodity exporters.
World Bank Deputy Chief Economist Ayhan Kose framed the moment as both a test and an opportunity. “Every crisis also brings an opportunity,” he said, urging governments to use this moment to strengthen policy frameworks, invest in infrastructure, accelerate business-enabling reforms, and mobilize private capital to support job creation at scale. World Bank President Ajay Banga struck a similar tone, arguing that “the basic test is the same for every country: protect people and preserve stability today, without giving up on growth and jobs tomorrow.” Whether governments heed that advice will determine whether the fertilizer shock becomes a temporary disruption or a lasting setback for global food security.
