The next hidden danger after oil prices break 100! El Niño combined with geopolitical conflicts triggers a global food inflation alarm.

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The blockade of the Strait of Hormuz triggered by the Iran conflict is causing an unprecedented structural split in the global fertilizer supply chain. Combined with the threat of El Niño climate, the global food market is nearing a dual supply crisis that could repeat the stagflation pattern of the 1970s.

Although the blockade of the strait has not immediately triggered a full-scale surge in grain prices, the internal fertilizer market has already experienced intense upheaval: phosphate fertilizers have soared by 25% due to a shortage of sulfur, while urea prices have defied the trend and dropped by 20% due to increased supply and high inventory in China. This extreme supply and demand divergence is causing differentiated transmission of planting costs for different crops, quietly reshaping the global agricultural cost curve.

What makes investors more cautious is that extreme climate risks and soaring energy prices are forming a macro resonance. Analysts warn the dual supply shock of energy and food could replicate the inflationary nightmare of the 1970s, which will not only directly push up global food prices, but could also trap central banks in deeper policy dilemmas between fighting inflation and preventing economic recession.

Although the overall fertilizer price proxy indicators have recently declined, pointing to mild short-term food price increases, the combined supply chain vulnerabilities and climate risks mean that the global food crisis alarm is far from being lifted.

Structural Split in the Fertilizer Supply Chain: Soaring Phosphate and Slumping Urea

The actual blockade of the Strait of Hormuz poses a direct threat to global fertilizer trade.

Before the conflict, about one-third of the world's urea and 15% of ammonia trade were transported through the strait. However, Bloomberg macro strategist Simon White points out that nitrogen fertilizer-related compounds are currently relatively unaffected by the war, with ammonia prices rising only slightly, and urea prices dropping 20% compared to pre-conflict levels.

Urea's contrary decline mostly benefits from a series of buffer factors: global inventories are relatively high, northern hemisphere farmers have already completed purchasing early, and China has released additional urea supply, effectively suppressing price increases.

In contrast, the phosphate fertilizer supply chain is much more exposed to the Middle East situation. Phosphate production is highly dependent on sulfuric acid, and 50% of the world's sulfur exports come from the Gulf region. Driven by the shortage of sulfur supply, phosphate fertilizer prices have surged 25% compared to pre-war levels. This split of "phosphate soaring, urea slumping" means that crops dependent on phosphate fertilizer and those dependent on urea will face very different cost pressures, which in turn affects farmers' willingness to plant and the future crop supply structure.

El Niño Layered on Top: Hidden Threat to Grain Output

On top of diverging fertilizer costs, the risk of El Niño further amplifies the vulnerability of global food supply.

Extreme weather patterns may not only directly lead to reduced yields in major grain-producing regions, but also alter the pathways of pest and disease transmission, increasing the hidden costs of agricultural production.

When fertilizer supply chain shocks meet El Niño climate risks, global agriculture faces a double squeeze of "rising costs" and "reduced output." For emerging market countries that rely heavily on fertilizer imports and have weaker climate adaptability, this compounded shock is particularly deadly, potentially triggering regional food security crises and transmitting to global food prices through international trade networks.

Dual Shock of Energy and Food: Replay of 1970s Stagflation Risk?

The current macro environment is showing dangerous features similar to the stagflation period of the 1970s. The Iran war and the blockade of the Strait of Hormuz have caused millions of barrels per day of oil and natural gas supply disruptions globally, with Brent crude prices breaking above $110. The surge in energy prices not only directly pushes up the production and transport costs of fertilizers, but also triggers widespread imported inflation.

Analysts warn that the dual supply shock of energy and food is replaying the macro risks that drove inflation in the 1970s. Against this backdrop, the market has completely erased expectations for Fed rate cuts, US treasuries and other sovereign bonds have been sold off, and yields have climbed sharply. Traditional safe-haven logic has failed, global stock markets are under pressure, and gold is being sold off for cash, causing capital to flow into cash and triggering synchronized declines across asset classes.

If food prices soar substantially in the coming months due to fertilizer supply chain breakdowns and El Niño yield reductions, global inflation will face a risk of a second rebound. This will not only completely close the window for central bank monetary policy easing, but could also seriously drag down global economic growth, plunging the macroeconomy into a typical stagflation quagmire. For investors, guarding against the tail risk posed by dual energy and food shocks has become an essential core consideration in current asset allocation.

Risk Warning and DisclaimerThe market involves risks, and investments should be approached cautiously. This article does not constitute personal investment advice, nor does it consider individual users' unique investment goals, financial conditions, or needs. Users should consider whether any opinions, views, or conclusions contained herein are suitable for their particular situation. Investment is at your own risk. ```