Standard Chartered research links higher oil prices to faster rises in global food inflation, mainly through higher fertiliser costs and trade bottlenecks. It says country outcomes depend on food’s weight in CPI baskets, reliance on imports, and dietary patterns. The analysis says global fertiliser trade is more exposed to disruption at the Strait of Hormuz than other production inputs. It adds that fertiliser affordability was already pressured by protectionist measures in major economies, including China and the EU.

Government Policy Response So Far

It notes that, since the US/Israel-Iran war began, governments have not introduced new market steps aimed directly at containing food CPI inflation. The reasons given include that natural gas prices, which matter more than oil for fertiliser production, have often proved more short-lived than oil-price spikes, and that governments already have large structural commitments to agriculture. The report states that global food inflation and headline CPI inflation tend to move closely together. It cites an IMF estimate that a 10% rise in oil prices over a year could add about 40bps to global inflation. It also says differences in consumer psychology may lead to wide variation in food CPI inflation across countries, as people focus on frequently bought items. Given the recent strength in oil prices, we are positioning for a knock-on effect into global food inflation. Brent crude has been stubbornly holding above $95 per barrel through early March, a direct consequence of the continued geopolitical tensions in the Strait of Hormuz that escalated throughout 2025. This sustained high price environment is the primary signal for our short-term outlook.

Fertilizer Pass Through And Market Positioning

The pass-through to food costs is happening quickly through the fertilizer channel, as expected. North American fertilizer price indexes have already climbed over 15% since December, creating a direct upside risk for agricultural producers’ input costs. We see this as a clear leading indicator for the prices of key agricultural futures in the coming quarter. This situation is made worse by the protectionist measures we saw from major economies last year. China’s export restrictions and the EU’s carbon tariffs had already tightened the global fertilizer market before the most recent energy price spike began. Those pre-existing strains mean that any new shock, like higher oil costs, has an amplified effect on affordability and, ultimately, food prices. The FAO Food Price Index supports this view, showing a 2.5% jump in the latest February reading, its third consecutive monthly increase driven by cereals and vegetable oils. This confirms the inflationary trend is not just theoretical and is already being reflected in global data. We anticipate upcoming national CPI reports for February and March will show food as a key driver of stubborn headline inflation. Historically, a 10% sustained rise in oil prices can add about 0.4% to global inflation, and we’ve seen a greater increase than that since late 2025. Therefore, we are considering positions that would benefit from higher-than-expected inflation prints, such as inflation swaps or short positions on interest rate futures. Central banks may be forced to maintain a more hawkish stance than the market is currently pricing in. Consumer behavior will likely amplify these effects, as shoppers are highly sensitive to the cost of staple goods. The resulting pressure on household budgets could negatively impact consumer discretionary spending. We are therefore looking at protective put options on consumer-focused ETFs, as well as positions in volatility indexes, to hedge against the market uncertainty this inflationary pressure will create. Create your live VT Markets account and start trading now.

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