PETALING JAYA: The U.S.–Iran conflict could trigger a prolonged wave of food inflation in Malaysia through fertiliser shortages, supply chain disruptions and rising agricultural costs, according to Bank Islam Malaysia Bhd’s research arm.
In a report titled Energy Shock Escalates Into Food Crisis: Harvests Under Pressure Amid U.S.–Iran Conflict, Bank Islam said the crisis has evolved beyond an energy market disruption into a broader supply shock affecting agriculture, logistics and inflation globally.
The report said disruptions in the Strait of Hormuz, which handles about 20% of global oil and liquefied natural gas flows, have sharply increased oil prices, freight costs and shipping disruptions while constraining global fertiliser supply.
“More critically, the shock is now transmitting into the global food system through rising fertiliser supply constraints, rising production costs and logistical bottlenecks,” it said.
Bank Islam warned the resulting energy-to-food inflation cycle could become more severe than during the Russia–Ukraine conflict.
Malaysia remains vulnerable due to its heavy dependence on imported food and agricultural inputs, particularly fertilisers sourced from Gulf countries, the report said.
It noted that fertiliser disruptions are among the biggest hidden risks emerging from the conflict, with the Strait of Hormuz serving as a key export route for urea, ammonia and phosphate-based fertilisers essential for crop production.
Urea fertiliser prices surged 83.9% year-on-year to US$725.6 per metric tonne in March, partly driven by higher natural gas costs.
The report warned that reduced fertiliser usage could hurt crop yields and worsen food inflation in the 2026–2027 harvest cycles.
“The global food system is fundamentally dependent on energy inputs. A disruption in energy supply is not isolated – it creates a cascade effect: Energy Shock → Fertiliser Shortage → Lower Yields → Food Inflation,” it said.
Bank Islam also said inflation pressures are increasingly shifting from fuel-led inflation toward food-led inflation, which tends to be more persistent and socially damaging.
“Most critically, food inflation is deeply social in its impact, hitting lower-income households disproportionately by eroding real purchasing power where it hurts most, at the dinner table,” the report said.
The bank urged stronger policy intervention, including diversifying fertiliser supply sources, improving logistics resilience and strengthening domestic agricultural capacity to reduce Malaysia’s dependence on imported food and inputs.
