The hidden commodity shock

The law of unintended consequences is among the oldest principles in economics. 

Policymakers focus on one problem, mobilize every instrument toward it, and then watch as the damage surfaces somewhere else entirely. Donald Rumsfeld captured the same idea with his taxonomy of “known unknowns” and “unknown unknowns.” Geopolitical crises have a habit of converting the second category into the most expensive one.

The current Middle East conflict is a case in point.

Most economic commentary has understandably concentrated on oil and liquefied natural gas, with the fear that disruptions in the Gulf could push energy prices sharply higher. That risk is real. But the more consequential shocks may be traveling through quieter parts of the commodity system, where supply chains are thinner, inventories are smaller, and price movements take months to surface in headline inflation data. By the time they do, the damage is already done.

Modern agriculture runs on nitrogen fertilizers — primarily ammonia and urea — both of which require natural gas as their principal feedstock. This is why the Gulf carries such outsized weight in global fertilizer supply. Qatar and Saudi Arabia, endowed with cheap natural gas, have become major exporters to Asia, Africa, and Latin America.

Disruptions to gas supply and shipping routes are already pushing prices higher. Urea prices in parts of Asia have risen more than 40 percent since the conflict escalated, reaching levels last seen during the 2022 crisis that followed Russia’s invasion of Ukraine. The timing is particularly punishing. The Northern Hemisphere is entering the spring planting season — the narrow window when farmers purchase fertilizer for wheat, corn, and barley. When prices spike at exactly this moment, farmers face a blunt choice: absorb the cost or cut application. Either way, food prices rise later in the year.

This is not a hypothetical sequence. The adjustment does not appear in inflation data immediately. It arrives embedded in harvest yields and grain prices — often just as central banks assume the shock has passed. 
 

A second commodity rarely mentioned in geopolitical analysis is sulfur — a by-product of oil and gas refining, and a critical input in phosphate fertilizer production. Nearly half of global sulfur exports move through the Gulf, and prices in parts of Asia have already reached record levels.

The connection to food is indirect but consequential. Phosphate fertilizers — essential to wheat, corn and rice yields — require sulfuric acid as a processing input. When sulfur supply tightens, phosphate costs rise alongside nitrogen costs. Commodity economists sometimes describe sulfur as a hidden multiplier in agricultural supply shocks: it amplifies what begins as a gas disruption into a broader fertilizer crisis through a bottleneck that almost no geopolitical risk model accounts for.

Taken together, these dynamics trace a familiar arc. Energy prices rise first. Fertilizer costs follow. Food prices arrive last — and linger longest.

-Javed Hassan

Then there is helium — a commodity that seldom appears in geopolitical risk analysis, and probably should.

Qatar produces roughly a quarter to a third of the global helium supply as a by-product of natural gas processing. When LNG flows are disrupted, helium output falls with them. Markets are thin, inventories are limited, and even modest supply interruptions can push prices sharply higher.

This matters because helium is deeply embedded in modern industrial supply chains. Semiconductor fabrication plants rely on it for cooling and precision leak detection. Fiber-optic manufacturing, aerospace engineering, and MRI machines all depend on it. A conflict that begins with oil tankers in the Strait of Hormuz can therefore ripple into global electronics supply chains months later — through the quiet tightening of a commodity most analysts ignored.

Taken together, these dynamics trace a familiar arc. Energy prices rise first. Fertilizer costs follow. Food prices arrive last — and linger longest.

For advanced economies, the result is a stagflationary impulse at a moment when central banks have limited room to respond. For developing countries, the arithmetic is more brutal. Food represents a far larger share of household consumption in poorer economies, and food price spikes are not merely economically painful — they are politically destabilizing.

The International Monetary Fund (IMF) and World Bank will revise up oil price assumptions and issue the standard warning about food security. What their models are less likely to capture is the fertilizer shock still moving through the system — the one that will not fully appear in the data until farmers begin reporting harvest shortfalls in the second half of the year.

Oil shocks dominate the headlines. Fertilizer shocks drive the food crisis. And the rung of the ladder that matters most right now is the one the cameras are not pointed at.

– Javed Hassan has worked in senior executive positions both in the profit and non-profit sector in Pakistan and internationally. He was Senior Visiting fellow at Fudan University, Shanghai.

X: @javedhassan