The global economy has been rocked by the ongoing tensions in West Asia, fuelled by the US-Israeli war on Iran. After oil prices, the conflict may also impact India’s farm fields, causing food prices to rise in the second half of the year.
India’s retail food inflation rose to 3.87% in March 2026, with the prices of tomatoes and cauliflower recording an increase of 34-36% year-on-year. Economists are warning that the situation will worsen in the future if tensions persist in the Gulf region.
FAO Chief Economist Maximo Torero told news agency ANI that tanker traffic through the Strait of Hormuz has collapsed by over 90-95% after Iran closed the key shipping route since late February.
“If the crisis (Gulf conflicts and below normal monsoon) persists,
India faces higher import costs, reduced domestic fertiliser availability, and pressure on food inflation, particularly for wheat, rice, and vegetables,” he said, despite the Centre’s $18.6 billion fertiliser subsidy.
Why Is India Vulnerable?
With no end to the conflict in sight, Torero said India is particularly vulnerable to the blockade of the Strait of Hormuz as it imports roughly 35% of its fertilisers from the Gulf and applies more than 120 kg of nitrogen per hectare.
Furthermore, global fertiliser prices have already risen 50-80% since the conflict began. Amid the disruptions, domestic fertiliser plants are running at only 60% capacity after the government capped natural gas allocation at 70% of historical averages under emergency rationing orders, Torero said.
India’s Kharif planting season in India is set to begin in May, but every additional tonne procured at crisis prices flows directly into the government’s subsidy bill, already set at $18.6 billion for FY2026-27. “The government’s subsidy will help, but fiscal pressures are mounting,” Torero said.
Furthermore, there is a 60% likelihood of below-normal monsoon rainfall in 2026, which can weaken crop yields.
What Happens Next?
Indian farmers are likely to bear the brunt of this import shock, as any small reductions in fertiliser imports lead to large yield collapses that could eventually lead to shrinking incomes for them. Higher fuel costs will also raise expenses for irrigation, transport, storage, and processing.
Torero said if the Strait of Hormuz is opened within 60 days, India can absorb the shock within three to four months. “If disruptions continue beyond 60 days, the effects become severe,” he added.
Under a prolonged conflict scenario, FAO projects global household welfare remaining 1.45% lower and food consumption 0.94 percent lower than baseline, with no full recovery even by 2030.
The most visible impact of the blockade is that food commodity prices will rise in the latter half of 2026 and in 2027, which would lead to food inflation and overall inflation. “FAO predicts overall reduction of economic growth could be of a reduction of 1.7%. As a result, we will be in stagflation, high inflation and low growth,” Torero said.
While the situation is currently in control, a prolonged conflict would be devastating for India’s import-dependent economy and food inflation.
(with inputs from ANI)
