economy
Soaring energy costs are rattling investors. Why the 'food price shock' could be worse
UBS warned that food costs could follow energy higher.
TL;DR
- Energy prices have surged significantly due to the Iran conflict, with Brent crude up 50% and WTI up 66%.
- Higher energy costs are increasing fertilizer prices, as natural gas is a major component of fertilizer production.
- Disruptions in key transport routes like the Strait of Hormuz and attacks on liquefied natural gas facilities have amplified supply chain risks.
- UBS forecasts fertilizer prices to rise 48% year over year, potentially leading to a 12% increase in global food prices.
- Advanced economies may see an additional 50 basis points of inflation, while emerging markets could experience up to 240 basis points.
- Without moderation in energy prices, the food price shock in emerging markets could rival the energy shock.