Financial markets have become obsessed with oil. Every escalation in the Middle East immediately triggers the same sequence: crude prices rise, inflation expectations rise, bond yields adjust, and investors start recalculating the Federal Reserve’s next move. Yet this narrow focus risks overlooking what may become the far more persistent inflation story over the coming months. The real risk is not oil. It is food.

The latest escalation around the Strait of Hormuz has once again exposed one of the world’s most important strategic chokepoints. Around one-fifth of global oil production transits through this narrow waterway, making any disruption immediately visible in energy markets. However, Hormuz is also a critical export route for fertilisers, particularly urea and ammonia, two essential inputs for global agriculture. As tensions have intensified, fertiliser prices have quietly begun to move in tandem with crude oil. Unlike oil, however, fertilisers do not affect inflation immediately. Their impact works with a delay. Farmers purchase fertilisers months before planting or harvesting. Higher input costs gradually feed into production costs before eventually reaching supermarket shelves. By the time consumers notice higher food prices, the original geopolitical shock has often disappeared from the headlines. This delayed transmission mechanism makes food inflation particularly dangerous. Markets tend to underestimate risks that develop slowly. Central banks cannot afford the same luxury.

The problem becomes even more concerning when combined with another factor that has received relatively little attention: El Niño. Meteorologists increasingly expect adverse weather conditions to affect agricultural production across several emerging economies, particularly in Asia, Africa and parts of Latin America. Lower crop yields, combined with rising fertiliser costs, create precisely the type of supply shock that monetary policy is least capable of addressing. History suggests this combination deserves serious attention. The food inflation experienced after Russia’s invasion of Ukraine was not driven solely by higher grain prices. Fertilisers became one of the principal transmission channels through which geopolitical tensions spread across global food markets. Today’s situation is not identical. Natural gas prices remain significantly lower than in 2022, reducing one of the key drivers of the previous fertiliser shock. Nevertheless, similarities are beginning to emerge. Once again, a conflict is disrupting one of the world’s largest fertiliser-producing regions just as farmers prepare for critical planting decisions.

Consumers are particularly vulnerable because food prices behave differently from energy prices. Petrol prices rise and fall quickly. Food prices rarely do. Once producers, distributors and retailers absorb higher costs, they are often reluctant to fully reverse price increases, even after commodity markets normalise. This explains why, despite inflation falling sharply from its post-pandemic peaks, food prices have remained stubbornly elevated across most developed economies. Households may have forgotten last month’s inflation figure, but they certainly remember their grocery bills.

For central banks, this creates an increasingly uncomfortable dilemma. Monetary policy has almost no influence over harvests, weather conditions or shipping routes through Hormuz. Higher interest rates cannot produce more fertiliser, reopen blocked trade routes or improve agricultural yields. Yet if food inflation accelerates again, inflation expectations risk becoming entrenched precisely when policymakers believed the battle against inflation was being won.

This also changes the investment narrative. Markets continue to interpret every movement in oil prices as a signal for monetary policy. That relationship remains important, but it may no longer be sufficient. Food inflation has historically proven more persistent because it directly affects households and shapes inflation expectations. It also carries greater political consequences, particularly in emerging economies where food accounts for a much larger share of household expenditure.

The irony is that investors may once again be looking in the wrong direction. Oil attracts headlines because it reacts immediately to geopolitical events. Agriculture reacts more slowly, but often leaves a much longer economic footprint. The greatest inflation risk over the coming months may therefore not come from another spike in crude oil. It may emerge quietly, season by season, from higher fertiliser costs, weaker harvests and a food supply chain that is becoming increasingly vulnerable to geopolitics and climate alike. Markets have learned to watch the oil wells. They may now need to pay equal attention to the wheat fields.

The implications are even greater for emerging markets. Food accounts for a significantly larger share of household expenditure than in developed economies, meaning food inflation feeds much more rapidly into headline inflation, social tensions and political instability. Many emerging market central banks have already kept interest rates relatively high to defend their currencies and preserve investor confidence. A renewed surge in food prices would leave them with very little room to ease monetary policy, even if domestic growth slows. For highly indebted countries, higher financing costs combined with weaker household purchasing power could further deteriorate fiscal positions. History repeatedly shows that food inflation has often been the catalyst for political unrest across emerging economies, from the Arab Spring to more recent episodes in Africa and Latin America. What may appear as a temporary fertiliser shock for developed markets can therefore evolve into a much broader macroeconomic and geopolitical challenge for emerging markets.