The prospect of the Global South, including India, being adversely impacted by supply-side shocks emanating from Russia’s war with Ukraine and the US-Israel conflict with Iran is definitely not good news. Russia’s conflict has entered a more dangerous phase in its fifth year as both sides are relentlessly attacking each other’s grain ports and vessels. There is a sense of déjà vu as this conflict threatens a food crisis, given that the warring parties are major exporters of wheat, barley, and sunflower oil. The uneasy lull in West Asia has been broken by US and Iran strikes, all of which implies that the Strait of Hormuz — through which a fifth of global oil supplies pass — remains shut. Global oil prices remain elevated as a consequence.
A global food crisis also stalked the Global South when Russia invaded Ukraine in February 2022. Prices of wheat and other essentials spiralled up due to disruption in the Baltic Sea region that hindered exports from Ukraine and Russia. But these adverse risks abated in a year due to a UN-sponsored Black Sea grain initiative that allowed the free passage of ships transporting grain. That deal collapsed in July 2023. What makes matters worse this year is that Russia has rejected a Black Sea truce as it saw no grounds for “half measures” that would offer respite to the other side. There is bound to be a major uptick in wheat prices as Russia and Ukraine have a combined share of 27.4% in global wheat exports.
Global wheat prices are surging also due to climate change. Crop prospects are somewhat bleak with persistent drought conditions in the southern plains in the US, which have impacted hard red winter wheat output. The US will register its worst harvest in half a century. Wildfires and record heat conditions are expected to adversely impact wheat production in countries like France in the European Union. Australia’s wheat output has declined due to the anticipated dry conditions and rising fertiliser costs. All of this is bound to impact food security in the Global South. The number of acutely food-insecure people in the most vulnerable nations could rise by a fifth to 247 million by end-2027, according to the World Food Programme.
As if all of this weren’t bad enough, global food prices will remain high due to El Niño conditions that happen every two to seven years. El Niño has hit global coffee and cocoa prices. This surge in coffee prices is seen in countries like Brazil. Maximo Torero, chief economist at the Food and Agriculture Organization, told the Financial Times that “right now, my concern is durum wheat and rice”, adding that a combination of El Niño and lower fertiliser usage in Australia, a major wheat grower, and India, the world’s biggest rice producer, was threatening to hit yields. “It’s a compound effect that is dangerous,” according to him. Sugar production has declined across the Asia-Pacific during strong El Niño episodes with India banning exports.
Fuel shocks due to the West Asian conflict compound the bad news for the Global South and highly energy import-dependent countries like India. There is a view that global food shocks are more consequential as the world has adjusted to the supply disruption in the Strait. Nothing could be further from the truth. Consider the travails of Saudi Arabia, the largest oil producer in the region, in shipping out its oil due to the blockaded Strait. It has depended on its East-West pipeline which extends from its eastern oilfields to the Red Sea port of Yanbu to supply to Europe and Asia. But the attacks of the Iran-backed Houthi forces in the Red Sea have forced it to rely on a route through the Suez Canal that is longer and costlier for its oil exports.
Since the US-Iran war began on February 28, Brent spot prices in March-August have averaged $98 a barrel, up 41% from March-August 2025. The rise in the Indian crude oil basket is of a similar order of magnitude. Costlier oil widens India’s trade deficit and pushes up domestic prices. As energy imports have to be paid for in US dollars, this would result in further downward pressures on the rupee. Such a sustained oil shock has forced India to pay more for its crude imports. Although the bullish Q1 GDP growth numbers in FY27 may indicate that the economy is resilient in the face of supply-side shocks, there is a clear and present danger of Brent prices remaining elevated due to the elusive prospects for peace in West Asia.
Food and fuel shocks over a prolonged period do not augur well for the Global South and India. There is no alternative to remaining vigilant and ensuring that the agriculture sector copes with this disruption. In this regard, the current easing of the ban on wheat exports is a welcome step as it can be a public good to alleviate global hunger while also boosting farmer incomes amid depressed domestic prices. India must enhance its energy security through greater self-sufficiency in domestic oil and gas production over the medium term.
Views are personal.
The writer is an economics and business commentator based in New Delhi.
Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.