Not Just an Oil Story: What the Iran Conflict Means for Foodservice Operators

The instinct when a Middle East conflict erupts is to watch the oil price. That instinct is not wrong, but for foodservice operators, it is incomplete.

A pressing but less-discussed impact of the Iran conflict is its strain on food supply chains, including fertilizers, vegetable oils, refined sugar, and plastic packaging. Many of these essential goods pass through a 21-mile corridor between Iran and Oman that is currently under stress.

Why Does the Strait of Hormuz Matter to the Food Industry?

The Strait of Hormuz, a narrow channel just 18 to 24 miles wide, links the Persian Gulf with the Gulf of Oman. It serves as the sole maritime route for most oil, liquefied natural gas, fertilizer, and cargo shipments from Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the UAE. Approximately 20% of the world’s seaborne oil and 20% of its LNG transits the strait daily.¹

Since U.S.-Israeli strikes on Iran began in late February 2026, Iran’s Islamic Revolutionary Guard Corps began issuing radio warnings prohibiting commercial vessel passage through the waterway. Major carriers responded by suspending all Hormuz transits and rerouting vessels around Africa’s Cape of Good Hope.¹ Maritime war-risk insurance coverage for the Persian Gulf was withdrawn by major providers effective March 5, making transit economically unviable regardless of conditions on the ground.¹

The rerouting has a real cost. Research by LSEG Shipping Research, a division of the London Stock Exchange Group, calculated that redirecting a tanker from Asia to northwest Europe via the Cape adds close to $933,000 in fuel costs per voyage, while doubling transit times from 16 to 32 days.¹ U.S.-based freight platform Flexport advised clients on February 28 to prepare for “longer lead times, tight capacity, elevated rates, and continued volatility across both ocean and air networks.”¹

The Thing We Might Forget: Fertilizer

Oil is the headline. Fertilizer may be the more consequential upstream threat for food.

According to Kpler, a commodity intelligence, approximately 33% of the world’s globally traded fertilizer transits the Strait of Hormuz, exported from Qatar, Saudi Arabia, the UAE, Iraq, and Iran.¹

QatarEnergy, the state energy company that operates Ras Laffan (the world’s largest LNG liquefaction and industrial complex), halted urea, ammonia, and methanol production following Iranian drone strikes on the facility. Qatar alone accounts for approximately 11% of global urea exports, with roughly 45% of all urea shipments originating from Gulf facilities.¹

The timing is particularly damaging. Northern Hemisphere spring planting begins now, which is the peak demand period for nitrogen fertilizer, and unlike crude oil, there is no strategic reserve to buffer this market. Janes, the defence and security intelligence firm, warned in a March 2 brief that elevated gas prices “will also very likely add pressure to increases in global fertilizer costs” and “raise the risk of global food price instability.”¹ A crop yield disruption in 2026 becomes a food cost problem later in 2026 and into 2027.

Vegetable Oils, Sugar, and the Ingredient Cascade

The effect on cooking oils was immediate. Bloomberg reported that soybean oil futures surged as much as 3.9% on March 2, reaching their highest level in more than two years, as expectations of higher crude prices pulled vegetable oils upward through biodiesel demand linkage. Benchmark palm oil prices in Kuala Lumpur rose 1.6% in the same session.¹

Aletheia Capital analyst Nirgunan Tiruchelvam noted that approximately 20% of global palm oil supply transits the Strait of Hormuz. Gulf Cooperation Council states, alongside Afghanistan and Pakistan, collectively import around 5 million tons of vegetable oils annually, volumes now facing significant delay or sharply elevated freight costs.¹

One of the least-reported impacts sits in refined sugar. The world’s largest standalone sugar refinery, located in Dubai, depends on raw cane supply that transits the strait. With that supply now disrupted, the premium that refined sugar commands over raw sugar jumped sharply, tightening availability across Gulf and South Asian markets. Food and beverage manufacturers sourcing from the region are confronting an acute procurement risk that has received almost no coverage in the domestic trade press.¹

Packaging: The Hidden Energy-Driven Cost Increase

Plastic packaging is heavily reliant on crude oil and petrochemical derivatives as feedstocks. As energy prices rise, plastic prices follow. For foodservice and grocery operators, this is not an abstract concern; it flows directly into the cost of virtually every packaged product on their shelves or menus.³

Glass packaging is also under pressure. Glass is an energy-intensive material, and price impacts have already been observed, with knock-on effects expected for makers of beer, wine, and spirits.³

How Long Does This Last?

AMP Bank Chief Economist Dr. Shane Oliver publicly placed a 60% probability on the conflict remaining limited, with a resolution in the near term. The remaining 40% covers a more prolonged scenario, where global oil supplies are significantly disrupted, logistics costs remain elevated through 2026, and upstream agricultural inputs face extended stress.⁴

Jordan Kear-Nash, principal consultant at supply chain consultancy Proxima, put the broader pattern plainly: “Conflicts are one of the most severe shocks to food supply chains because they hit availability, cost, and logistics simultaneously.”⁵ That triple pressure on availability, price, and timing is what makes geopolitical disruption different from ordinary inflation.

Oxford Economics published scenario analysis placing Brent crude at around $84 per barrel during active Strait disruption, with the geopolitical aftermath expected to keep a floor under prices through 2026 even in a relatively swift resolution.¹

What Operators Can Do Now

The supply chain consultants interviewed across the trade press this week have coalesced around a consistent set of recommendations for food and beverage businesses of all sizes.

For any operator, regardless of size, the starting point is understanding where your critical ingredients actually come from, beyond your immediate distributor. Proxima’s Kear-Nash says the most resilient companies “run scenario planning, pre-qualify alternative suppliers and routes, and gradually rebalance exposure away from single-country dependencies” and that this preparation needs to happen before disruption, not during it.⁵

For smaller and regional operators, resilience is largely about relationships and substitution readiness. Argon & Co partner James Watson notes that local businesses benefit most from agility: maintaining more than one regional supplier for key ingredients and having agreed substitutions in place before a shortage forces the decision.⁵

For multi-location operators, the priority is supply chain visibility beyond direct suppliers. Real-time awareness of ingredient origin, transit routes, and backup options is the foundation; procurement teams without this visibility are effectively operating blind during a disruption.

The Broader Context

The Iran conflict is yet another major geopolitical shock to food supply chains in four years. Covid, tariff chaos, the war in Ukraine and Houthi attacks on Red Sea shipping drove up costs on a wide range of traded goods, including coffee.⁵ Each successive disruption has accelerated the industry’s awareness that supply chain resilience cannot be built reactively.

“The war is not just a story about oil prices,” economist David McWilliams told Al Jazeera. “It’s a logistics problem, a supply chain problem, and ultimately, transportation is the energy of the global economy.”⁶

For foodservice operators who have spent the past two years navigating tariff uncertainty, labor cost pressure, and cautious consumers, another input cost shock arrives at a difficult moment. The situation remains fluid. Watching freight rates, fertilizer futures, and vegetable oil markets over the coming weeks will tell operators more about the medium-term cost environment than any single policy announcement.

Footnotes

1. Louis Gore Langton, “Energy shock, fertilizer crunch, freight surge: Food manufacturers face triple hit from Iran war,” Food Ingredients First, March 4, 2026. https://www.foodingredientsfirst.com/news/hormuz-crisis-food-ingredients-supply-chain.html
2. “How US-Iran Conflict is Reshaping Global Supply Chains,” Supply Chain Magazine, March 2026. https://supplychaindigital.com/news/us-iran-reshaping-global-supply-chains
3. Flora Southey, “Iran closes Strait of Hormuz: Which foods will get pricier?,” FoodNavigator, March 4, 2026. https://www.foodnavigator.com/Article/2026/03/04/straight-of-hormuz-impact-on-food-pricing/
4. Pearly Neo, “Iran Conflict: What does this mean for global food sector?,” FoodNavigator Asia, March 3, 2026. https://www.foodnavigator-asia.com/Article/2026/03/03/iran-conflict-what-does-this-mean-for-global-food-sector/
5. Augustus Bambridge-Sutton, “Iran crisis: Protecting food supply chains in war,” FoodNavigator, March 11, 2026. https://www.foodnavigator.com/Article/2026/03/11/protecting-food-supply-chains-in-war/
6. “How will soaring oil prices caused by Iran war impact food costs?,” Al Jazeera, March 10, 2026. https://www.aljazeera.com/news/2026/3/10/how-will-soaring-oil-prices-caused-by-iran-war-impact-food-prices