The Iran war is unresolved, the "super El Niño" is approaching—is a global food price surge on the way?

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The global agricultural product market is simultaneously facing two unprecedented pressures: the fertilizer and energy supply shocks brought on by the Iran war have yet to subside, and meteorologists have issued warnings that a potentially exceptionally strong "Super El Niño" weather event is brewing. If these two major risks become reality simultaneously, global food prices may face the largest upward shock in years.

The US-Iran ceasefire agreement showed clear cracks less than 48 hours after taking effect. Due to Israel's continued airstrikes on Lebanon, Iran believes this violates the ceasefire terms and disagreements have arisen. Joe Davis, commodity director at Illinois futures brokerage Futures International, said this dispute "is an escalation of the war no matter how you look at it." Wheat futures immediately rose, leading gains by as much as 0.7%, recovering some of the losses after Wednesday’s ceasefire news.

Meanwhile, climate scientists warn a "Super El Niño" phenomenon is gradually taking shape—U.S. meteorologists estimate that the probability of a "strong" El Niño event occurring between October and December this year is about one-third, and European climate models put the probability even higher. Chris Jaccarini, senior analyst at the Energy & Climate think tank, said, El Niño typically generates upward price pressure on cocoa, edible oils, rice, and sugar, and poses broader threats to tropical products like bananas, tea, coffee, chocolate, and soybean feed livestock.

The United Nations World Food Programme (WFP) issued an analytical warning last month: if the Iran war continues beyond June and oil prices stay above $100 per barrel, the population facing acute hunger globally could surge by 45 million, marking the largest crisis since the outbreak of the Russia-Ukraine conflict. This figure will be added to the existing 318 million globally food insecure people.

Ceasefire Agreement Faces New Uncertainties, Wheat Futures Rebound Under Pressure

Wheat stands out as the most sensitive major agricultural product to the Iran war, rooted in its high dependence on nitrogen fertilizers. The Strait of Hormuz is one of the world’s most important fertilizer trade routes, with about one-third of global seaborne fertilizer trade passing through here. Since the US and Israel launched airstrikes on Iran on February 28, related shipping in the strait has nearly come to a halt.

Joe Davis also pointed out that prolonged drought in the Great Plains and deteriorating crop conditions—already reflected in the USDA report released Monday—continue to support wheat’s relative strength compared to corn and soybeans. "Wheat has outperformed corn and soybeans in the 'risk sentiment' rebound since the ceasefire low, which is a result of both factors," he said. According to a Bloomberg survey of analysts, the USDA’s latest World Agricultural Supply and Demand Estimates report, scheduled for release Thursday, is expected to show falling US wheat inventories, further supporting wheat prices.

Fertilizer Crisis Weighs on US Planting Season

The shock of the Iran war to the fertilizer market comes at an especially unfortunate timing, coinciding with the full onset of the US planting season. The sharp climb in energy prices and fertilizer costs has left American farmers deeply worried about this year’s crop yields and food prices.

Paul Donovan, chief economist at UBS, pointed out in a research report at the end of March that every spike in energy prices inevitably raises concerns about rising food prices, because fertilizer production is an energy-intensive industry and natural gas is used in the production of some chemicals.

Dawid Heyl, co-lead portfolio manager for Ninety One Global Natural Resources Strategy, told CNBC in a video interview that, compared to the previous Russia-Ukraine conflict, he is much more concerned about the threat of this Iran war to food inflation. "My concern over this Iran war far exceeds that of the Russia-Ukraine conflict, primarily because of its direct impact on nitrogen fertilizer production and supply accessibility," he said.

Probability of "Super El Niño" Forming on the Rise

European climate models show that the probability of a very strong, even "super," El Niño event is higher than US forecasts, but these predictions are subject to the uncertainty inherent in the "spring barrier" effect. El Niño refers to a natural warming of the surface water in the tropical eastern Pacific; when sea temperatures in this area are more than 0.5 degrees Celsius above the long-term average, it is officially confirmed. While there is no official scientific classification for "Super El Niño," it usually refers to an exceptionally strong phase with sea temperatures at least 2 degrees Celsius above average.

Chris Jaccarini characterizes this climate risk as a major amplifier of current inflation pressures. "Food prices are being squeezed from two sides: one is extreme climate events disrupting production in key regions, while the other is the highly fossil fuel-dependent food system making it highly exposed to rising oil, gas, fertilizer, transport, and packaging costs." He told CNBC by email:

"This is precisely what makes the prospect of a strong El Niño event so alarming—it amplifies risks in a climate system already destabilized by human emissions, further raising inflation together with high fossil fuel prices."

Paul Donovan also wrote in his report: "If a Super El Niño weather pattern does occur in 2026, drought and limited water supply may be even more threatening than nitrogen fertilizer shortages."

Dual Risks Combine, Global Food Security Alarm Sounds

If the impacts of war and climate shocks both occur, their combined effects will far exceed those of a single factor. Dawid Heyl bluntly stated, "If two negative factors happen at the same time, the situation could be very tough." He also pointed out that India, Australia, Brazil, and Argentina are all countries highly affected by El Niño, though the specific risks faced by each vary. The EU also warned earlier this month that if an El Niño event occurs later this year, significant drought threats would hit the main agricultural season in northwest Ethiopia, South Sudan, and Sudan, "posing major risks to the main agricultural season."

In the face of rising concerns over food security, Chris Jaccarini believes the core response lies in strengthening international cooperation, promoting shared net-zero emissions targets, and wealthy countries providing climate finance to agricultural producers with weak climate resilience—to help farmers adapt to climate shocks, ensure food production and farmer livelihoods. "Amid traditional geopolitical partnerships under pressure, international cooperation is more important than ever," he said. "Reducing food price volatility depends on countries working together to achieve net-zero targets."

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