The global conversation around the US-Iran conflict has largely focused on oil. Crude prices surged nearly 48% between February and May 2026 after Iran's blockade of the Strait of Hormuz disrupted one of the world's most critical energy corridors. But for countries such as India, the more consequential story may lie elsewhere: in fertilizers, grains, edible oils and agricultural inputs whose inflationary effects tend to linger long after geopolitical conflicts fade from the headlines.
A new analysis by Bank of Baroda Economics suggests that while energy prices grabbed immediate attention, the second-order effects on agriculture and food systems could prove far more persistent. The report estimates that India's wholesale inflation could average 7-8% in FY27, even if the conflict subsides, reflecting the deep and delayed transmission of higher commodity costs into the broader economy.
The numbers are striking.
Between February and May 2026, the World Bank's overall commodity index rose 30.7%. Energy prices jumped 44.9%, but fertilizer prices were not far behind, surging 37.8%. Urea prices alone soared 63.2%, while diammonium phosphate (DAP) and triple super phosphate (TSP) rose 22.8% and 33.1%, respectively.
This matters because fertilizers occupy a unique position in the inflation chain. Unlike oil, whose impact is immediate and visible at fuel stations, fertilizer inflation works slowly through agricultural production cycles. Farmers absorb higher costs during sowing seasons, crop economics deteriorate, and the effects eventually appear months later in wholesale food markets and retail grocery bills.
The current fertilizer shock is not merely a wartime phenomenon. It reflects a structural supply squeeze.
Natural gas, the key feedstock for urea production, has become significantly more expensive following disruptions to Gulf energy infrastructure. Shipping bottlenecks have further constrained supplies. For phosphate fertilizers, the situation is equally concerning. Major suppliers such as Saudi Arabia and Morocco depend heavily on maritime routes affected by the conflict. Even if military tensions ease, fertilizer supply chains cannot be rebuilt overnight.
Historically, fertilizer inflation has had one of the longest transmission lags in commodity markets. Farmers typically make planting decisions months before harvests reach consumers. As a result, the inflationary consequences often emerge after geopolitical crises have already faded from public attention.
The agricultural data already suggests the process has begun.
The World Bank's agriculture index rose 5.7% during the February-May period, led by grains and edible oils. Wheat prices climbed 14.8%, rice increased 8%, and maize rose 3.1%. Meanwhile, soybean oil surged an extraordinary 38.5%, rapeseed oil gained 15.5%, and palm oil rose nearly 10%.
These increases are being driven by a convergence of factors rarely seen simultaneously.
First is the direct impact of higher input costs. Fertilizers, diesel and transportation expenses have all increased. Second is weather risk. The report notes that adverse climatic conditions are already affecting agricultural output across several exporting regions. Third is the growing competition between food and fuel.
Renewable energy policies worldwide are increasing demand for agricultural commodities used in biofuels. Soybean oil is increasingly diverted into biodiesel production, while corn is being used for ethanol. This creates a structural source of demand that remains largely unaffected by economic slowdowns or geopolitical ceasefires.
The result is a market where supply constraints and demand pressures are reinforcing each other.
India is particularly vulnerable.
The country remains the world's largest importer of edible oils and a major importer of fertilizers. Higher global prices therefore transmit directly into domestic inflation. While India has built substantial food security buffers through public grain procurement, it has far less control over imported inputs such as potash, phosphates and edible oils.
This explains why policymakers may find the next phase of inflation more difficult to manage than the initial oil shock.
Oil inflation tends to moderate relatively quickly once supply routes reopen and markets regain confidence. Agricultural inflation behaves differently. Once planting costs rise, they become embedded in the production cycle. Higher fertilizer prices today become higher crop costs tomorrow and higher food prices months later.
Moreover, the conflict's impact extends beyond fertilizers.
Cotton prices have risen 24.5% and rubber prices 16.9%, partly because elevated petroleum costs have increased the price of synthetic substitutes. This creates additional inflationary pressure in textiles, apparel and manufacturing supply chains. Food processors, consumer goods companies and agricultural exporters are all likely to face margin pressures in the months ahead.
Compounding the challenge is the weather outlook.
The Bank of Baroda report warns that 2026 could witness one of the strongest El Niño events since 1950. If that forecast materializes, agricultural production across major exporting regions could come under further pressure. Heat stress, irregular rainfall and lower crop yields would add a climate-driven layer of inflation on top of existing geopolitical disruptions.
This is why expectations of a rapid normalization in commodity markets may be misplaced.
Many analysts assume that a ceasefire in West Asia would quickly reverse recent price increases. That assumption may hold true for crude oil but appears far less convincing for agriculture. Fertilizer production, shipping logistics, inventory rebuilding and crop cycles operate on timelines measured in quarters rather than weeks.
The lesson from previous commodity shocks—from the Russia-Ukraine war to pandemic-era supply disruptions—is that food inflation often proves far stickier than energy inflation. Once farmers face higher costs and inventories tighten, prices can remain elevated long after the original trigger disappears.
For India, the immediate concern is not merely the cost of oil imports. It is the possibility that today's fertilizer shock becomes tomorrow's food inflation problem.
The war may eventually end. The inflation it has unleashed across the agricultural value chain could prove far more enduring.