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- Food prices may rise on higher oil and fertilizer input costs as well as a potential El Niño event later in 2026, the investment bank said.
- The combined effects could add 2.1 percentage points to existing food inflation over the next 12 months.
- Net food importers Singapore and the Philippines will be most directly exposed to price shocks, with higher costs affecting countries right across the region.
A supermarket in Indonesia on May 1, 2022. Relative to other countries, food consumption accounts for a large proportion of what people spend on in countries like Indonesia, the Philippines and Vietnam, said economist Mohamed Faiz Nagutha.Adriana Adie | Nurphoto | Getty Images
Southeast Asia will likely face a food-supply shock, as food becomes more expensive on higher oil and fertilizer prices caused by the Middle East conflict as well as exposure to the effects of a potential strong El Niño event in late 2026, according to a report by Goldman Sachs.
“The oil shock from the Middle East conflict has shown up in fuel-sensitive CPI items, and higher fertilizer prices will raise farm input costs,” Goldman said, adding this would force governments in the region to reconsider the tradeoff between food and fuel.
“A potential strong El Niño event in late 2026 could create another food-supply shock just as oil and fertilizer pressures are passing through the food chain,” the investment bank added.
Among Southeast Asian nations, the bank expects Singapore and the Philippines to be directly exposed to shocks in global food prices, due to their position as net food importers.
The rest of Southeast Asia also remains vulnerable to food-price shocks. While Malaysia and Indonesia may appear to be more insulated due to their palm oil industries, both become net food importers if their palm oil sectors are not taken into consideration, the report said.
In Thailand, more than 90% of fertilizers are imported, which leaves the country exposed to global food-price shocks via higher food input prices, Goldman noted.
Fuel shortages resulting from the Iran war are likely to show up in food prices. As energy is a key production input and transportation cost for commodities such as food, fluctuations in oil prices are rapidly transmitted along the supply chain, according to a paper by the London School of Economics and Political Science.
Continued oil supply disruptions could also further raise the price of fertilizers from the Middle East and potentially affect their availability, according to a report by the OECD. “This could affect planting and harvesting seasons over 2026 and 2027, reducing yields and potentially leading to higher food prices over time,” it said.
Goldman’s report estimates that combined shocks from volatility in oil, fertilizer, and the effects of El Niño will add 1 percentage point on average to Southeast Asia’s food inflation after six months, and 2.1 percentage points after 12 months, before moderating to 2 percentage points in 18 months.
“These estimates should be read as additional pressure on top of the usual food inflation trend, not as forecasts of total food inflation,” it added.
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