Forget Oil. Putin’s War Is Wrecking the Wheat Market.

Russia’s invasion of Ukraine threatens to significantly disrupt the global supply of wheat, sending prices for the vital crop skyrocketing and raising alarm bells among food security experts over its ripple effect on import-reliant countries in the Middle East and North Africa. 

Barely a week into the conflict, wheat prices have already spiked to record highs as traders fear exports from Ukraine, known as the breadbasket of Europe, could slow to a trickle or even halt altogether while Russian forces damage Ukrainian ports. In Russia, the world’s top wheat producer, exports are being interrupted as international companies abandon long-standing business ties and extricate themselves from the country amid massive Western sanctions. 

“We’re talking about something that would really disrupt production,” said Joseph Glauber, a senior research fellow at the International Food Policy Research Institute. “The fact that it’s happening in one of the breadbasket areas of the world is what’s so worrisome.” 

Even before the war began, global markets were already strained by the ongoing pandemic and regional droughts, which squeezed production and fueled inflation around the world. In the first few months of the pandemic, wheat prices surged by 80 percent, according to the International Monetary Fund. Wheat futures climbed to $10.59 per bushel on Wednesday, the crop’s highest price since 2008.

This is “coming on top of a tightness in global supply,” said Glauber, the former chief economist at the U.S. Agriculture Department. “This couldn’t have come at a worse time.”

The invasion only exacerbated these existing economic pressures, from driving up prices in the energy sector—oil, gas, and coal—to fueling fertilizer shortages. But in the short term, the global supply of wheat’s disruption has unnerved top international organization officials and food security experts the most.

The conflict has already ground Ukrainian exports, primarily from port cities on the Black Sea under siege by Russian forces, to a halt. In Russia, massive Western sanctions are already having a significant—if indirect—effect on the export of wheat and other vital crops as the financial industry that underwrites the country’s commodity businesses are blacklisted and global maritime shipping companies announce they’ll stop operating in Russia.

Sanctions on Moscow’s financial sector could have a dramatic impact on its commodities sector, experts said. VTB Bank, for example, one of Russia’s largest banks that is now the target of U.S. sanctions, handles almost two-thirds of Russia’s commodity business, said Helima Croft, head of global commodity strategy at RBC Capital Markets, a global investment bank. 

All this means the economic shocks of the Russian invasion will reverberate well beyond Eastern Europe, particularly for vital crops like wheat. “Look where these wheat exports go,” Croft said. “They go to countries that have underlying social tensions, and we’ve seen issues over cost of living, food prices, commodity prices causing protests before.”

Some of the Middle East and North Africa’s most populous countries—including Egypt, Iraq, Algeria, Tunisia, and Lebanon—are heavily reliant on wheat imports from Ukraine and Russia. As the invasion disrupts global supply, experts fear it will ramp up pressure on food security in these countries, many of which are already suffering from inflationary pressures and the impacts of drought.

Countries like Yemen and Lebanon are “are already on their knees in terms of hunger, in terms of food insecurity,” said Arif Husain, the chief economist at the World Food Program. “Many of these populations … are a step away from famine.” 

Rising food prices could also fuel unrest and displacement in the region, fueling fears of new waves of political instability. Jordan, for example, faced a wave of massive protests in 2018 over the government slashing bread subsidies while neighboring Iraq was gripped by protests last year, spurred in part by rising food prices. In 2011, spiraling food costs helped spark major unrest during the Arab Spring.

“History tells us that when you squeeze people so badly that they have no option between starvation and migration, they choose to migrate,” Husain said. 

As prices surge, many countries are now scrambling to find ways to bolster their supply. Lebanon, which only has one month’s supply of wheat reserves left and imports 60 percent of its wheat from Ukraine, has desperately tried to secure alternative sources from other top producers, including the United States, Canada, and India.

On Tuesday, Egypt’s supply and internal trade minister, Mohamed Moselhi, pledged to expand local wheat production by 36 percent, despite the country’s historic challenges with water scarcity. Egypt, the world’s top wheat importer, relies on Russia and Ukraine for about 85 percent of its wheat supply. 

For other countries that are both dependent on wheat imports and experiencing humanitarian crises—like Yemen—aid organizations fear the cascading pressures of Russia’s invasion could be catastrophic. As the war threatens to further push Yemen’s economy into turmoil, the World Food Program has called for $800 million in humanitarian funding to aid the region. 

“We have no choice but to take food from the hungry to feed the starving and, unless we receive immediate funding, in a few weeks, we risk not even being able to feed the starving,” the organization’s executive director, David Beasley, said in a press statement. “This will be hell on Earth.”

David Laborde, a senior research fellow at the International Food Policy Research Institute, warned that as the war continues to rattle global commodity markets and disturbs the global fertilizer supply—Russia is one of the world’s biggest producers of potash and processed fertilizers—these consequences could be felt beyond the wheat market.

“The fertilizer issue is going to be critical,” he said. “The disruption on fertilizer today means [a] reduction for the next harvest, and not just on wheat—on all crops.” 

“You’re talking about a systemic shock,” he said.