The now paused war between the United States and Iran has not only rippled through oil markets, it also threatens the world’s food security by disrupting global food and fertilizer supply chains.
To counter this economists and governments are planning to bring new proposals to redraft global agricultural trade rules to allow nations to better hedge against such massive disruptions.
“The disruption of the Strait of Hormuz has exposed how deeply energy, fertiliser, and food systems are intertwined,” said Prof Biswajit Dhar, former WTO Chair at the Indian Institute of Foreign Trade and one of the authors of a group of leading trade and development economists who have come up with the new policy prescription.
What appears at first glance to be a geopolitical conflict has rapidly translated into a systemic economic shock, cascading through global supply chains that the current trade regime assumes will remain stable.
Nowhere is this more evident than in India, a nation, whose fertiliser supply, long considered secure through diversified imports, is being hit not because Iran is a dominant supplier, but through transmitted effects, such as higher energy costs, disrupted LNG flows through Hormuz, and sharply rising global fertiliser prices.
“The US-Iran war has effectively turned the system volatile, and this volatility is likely to persist even after hostilities subside,” Dhar said.
The Model Treaty on Agricultural Trade for Sustainable Food Systems, backed by researchers linked to the Institute for Agriculture and Trade Policy, Centre for Development and Environment at the University of Bern and other global institutions, is being proposed at a moment when the fragility of the existing system, anchored in the World Trade Organization’s Agreement on Agriculture, seems no longer viable. It is being stress-tested in real time.
Its authors, including Elisabeth Bürgi Bonanomi, Caroline Dommen, Sophia Murphy, Biswajit Dhar and Bernard Lehmann, argue that the existing WTO framework was “flawed from the start” and has proven incapable of adapting to shocks of this nature, whether climate change, pandemic disruptions, or now war-driven supply chain breakdowns.”
The move comes as WTO members sit down for their next ministerial conference. Long-standing divisions over agricultural subsidies and food security are now intersecting with a far more immediate concern: the resilience of the global food system in an era of geopolitical fragmentation.
As shipping risks rise and insurance premiums climb, LNG cargoes have become more expensive and less predictable, squeezing margins for urea production. Output cuts, estimated at hundreds of thousands of tonnes per month, are already being reported at gas-based plants.
At the same time, India’s broader fertiliser dependence is being exposed. The country imports roughly a fifth of its urea, about half of its DAP, and virtually all of its potash. A substantial share of these supplies is linked, directly or indirectly, to Gulf producers and routes.
As the conflict chokes shipping lanes and raises freight and insurance costs, the result has been a sharp increase in landed prices across nitrogen, phosphatic, and potash fertilisers. Global prices reflect this strain. Urea and ammonia have surged, while potash markets have tightened further.
Officials pointed out that for now India, has decided to absorb the shock through higher subsidies. “It is a fiscal dilemma. Either absorb the shock or risk reduced fertiliser application, with knock-on effects for farm output and food prices,” they pointed out.
This is precisely the kind of systemic vulnerability the new model treaty seeks to address. A disruption in a single maritime corridor has through energy markets send price shock waves into fertiliser production and, ultimately, into food security risks for import-dependent economies like India.
“The assumption that global markets can seamlessly reallocate supply has broken down under stress. The model treaty proposes a fundamentally different architecture, one in which trade is subordinated to food security, environmental sustainability, and equity rather than treated as an end in itself,” explained Dhar.
“It explicitly calls for governments to reclaim policy space to support domestic production, diversify supply chains, and intervene in markets where necessary,” he added.
WTO rules in order to ensure a “level playing field” between the developed farm surplus economies of the US, Australia and other western nations had actually penalised any third world government moves to do so,
Already faced with rising fertiliser costs and uncertain supplies, policymakers in India are accelerating efforts to diversify sources of phosphates and potash, including overseas investments in mineral assets.
There is renewed emphasis on expanding domestic urea production and securing long-term LNG contracts from outside the Gulf.
Yet these are medium- to long-term adjustments; in the immediate term, food systems remain exposed. India has to plan for the longer term as the current war is likely to leave a lasting imprint.
Even in the event of a ceasefire, insurers and shipping markets are expected to embed a persistent “war-risk” premium into Hormuz-linked trade.
That implies a structurally higher cost floor for energy, fertilisers, and by extension, food production in countries like India. Which in turn means volatility is being priced in permanently.
The WTO’s rules were designed for a world where efficiency and comparative advantage could be pursued under relatively stable geopolitical conditions.
However, the current crisis has shown that when supply chains are tightly coupled and concentrated, shocks do not remain localised, they cascade with ripple effects throughout the world.
“The model treaty directly targets these structural weaknesses. It calls for reducing excessive concentration in global food and input markets, regulating large agribusiness firms and commodity traders, and ensuring that farmers receive prices that reflect the true cost of sustainable production,” said Dhar.
It also reframes food security as a “common concern of humankind,” suggesting that states have both the right and the obligation to intervene, even if that means restricting trade under certain conditions.
Such provisions would mark a significant departure from the liberalisation-first approach embedded in existing WTO agreements.
Interestingly, the behaviour of states during the current crisis, whether through subsidies, supply controls, or strategic diversification, suggests that practice is already moving ahead of doctrine.
The US–Iran war has done more than disrupt markets. It has exposed the underlying architecture of global trade as one built on assumptions that no longer hold.
Jayanta Roy Chowdhury
