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Supply chain disruption to encourage sustainable foods
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Thursday, 11 June, 2026, 15 : 00 PM [IST]
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London, UK
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The Iran War is the latest in a series of supply shocks affecting the food industry. Ecovia Intelligence expects operators to mitigate supply chain risks by investing in sustainable agriculture and new technologies in the coming years.
In recent years, the supply of food and ingredients has been affected by Covid-19, climate change, the Ukraine war, tariffs and regulations, and now the Iran War. These disruptions to supply chains have led to price fluctuations and changes in sourcing patterns. Sustainable foods—produced according to organic farming principles and/or sustainable agricultural practices—have been particularly affected because they generally have fewer supply sources.
The food industry has been affected by the current geopolitical conflict in three major ways: higher fertiliser prices, higher energy costs, and increased food insecurity. About a quarter of globally traded fertiliser typically passes through the Strait of Hormuz. Almost half of all urea—the world's most widely used nitrogen fertiliser—is supplied by countries in the Gulf region. The blockade has led to a spike in fertiliser prices, with European farmers paying about 50% more than a year ago.
Organic farmers are less reliant on synthetic fertilisers and are therefore less exposed to these price increases. Research also suggests that organic farms have lower energy inputs than conventional farms. As a result, the Iran War could narrow the price gap between organic and conventional foods. The previous major geopolitical conflict, the Ukraine war, led to similar increases in fertiliser, feed, and energy costs; consequently, the price premium for organic milk and other products narrowed significantly in 2022.
Although production costs for organic and conventional foods are expected to converge, demand is likely to be adversely affected. Preliminary research suggests that consumer expenditure is declining in Europe. Higher fuel and energy costs, combined with expectations of rising grocery prices, are making consumers more cautious with their spending. Organic food sales are likely to be affected as consumers seek ways to reduce grocery costs. The previous geopolitical conflict resulted in similar food inflation in 2022, when European organic food sales fell by about 2%.
As long as the Strait of Hormuz remains closed, it is unclear how long these supply shocks will persist. Some economists predict food inflation could continue well into 2027. As food prices rise, consumers are likely to become more cautious when purchasing sustainable products. In the longer term, however, consumers are expected to place greater value on food provenance and traceability. There is also likely to be increased emphasis on sustainable and regional production as consumers seek to support their local and rural economies.
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