As conflict continues in the Iran war, infrastructure and ports continue to be under attack, posing significant issues with trade and grain markets. Mike Castle, senior market economist with Stone X, says that the current stakes are high for the ag industry, and if the escalation by the Islamic Revolutionary Guard Corps continues.
“It sounds like the IRGC is in full control of the negotiations. They are the hardliners. They are the ones who are not interested in making a deal, right? They know the pain this is inflicting on the global economy. They know the light that this paints the U.S. in. They feel like they have some leverage from this, and they know that if a deal is made, right, their existence may be in question, and the way that they run the country, the control they have within the country, could be in question. So, I don’t see them really being willing to, you know, make a deal very soon.”
He says the conflict could broaden as well/
“You’re hearing the threats to close the – I’ll probably butcher the pronunciation here – but on the Red Sea, the Bob al-Mandeb Strait. The Houthis in Yemen, right? We saw this a few years ago, and that has a lot of impacts to ag specifically, right? The first ship that got sank by the Houthis a couple years ago was carrying fertilizer going from Saudi Arabia up into Europe. So, there were very direct stakes for the ag market itself, and if you did see that happen, if you had not only the Strait of Hormuz closed but also the Red Sea shipping impacts return.”
It would make for an already bad situation getting worse.