In recent years, the impact of geopolitical conflicts on global food markets has become increasingly pronounced. As conflicts in the Middle East continue to escalate, regional security risks are not only reshaping the supply-demand dynamics of the energy market but are also transmitting shocks to global agricultural markets through trade, shipping, and financial channels.
Rice, one of the world’s most important staple crops, is particularly sensitive to geopolitical risks due to the regional concentration of its trade and its heavy reliance on maritime shipping routes. This sensitivity is especially acute for specific rice varieties with highly concentrated trade flows and limited transport pathways, where localized conflicts can trigger short-term regional market volatility.
From a global supply-demand perspective, the international rice market is currently in a relatively relaxed cycle. Forecasts from both the Food and Agriculture Organization (FAO) and the International Grains Council (IGC) indicate that global rice production and inventories are on a growth trajectory for the 2025/26 season, with the stocks-to-use ratio remaining at a high level and international prices declining year-on-year. Against this macroeconomic backdrop, the ongoing conflict in the Middle East has not altered the fundamental global balance of rice supply and demand. However, it is creating structural disruptions in regional markets by impacting shipping safety, increasing transportation costs, and blocking certain trade routes.
Among these disruptions, the impact on India’s exports of Basmati rice to the Middle East has been particularly severe. Due to heightened shipping risks in the Strait of Hormuz, an estimated 400,000 metric tons of Indian Basmati rice have been delayed or are stranded, resulting in a temporary bottleneck in the trade chain.
This has led to a clear divergence in regional prices. Under pressure from the supply that is unable to reach its intended market, domestic prices in India have declined. Meanwhile, import markets in the Middle East are facing upward price pressure due to increased transportation costs and supply uncertainty.
For China, the direct impact of this conflict on its rice supply system is limited. The country maintains a stable domestic grain production system, with a self-sufficiency rate for staple grains consistently above 95%. Furthermore, its rice imports come from a diversified range of sources. However, the Middle East’s significant role in the global energy and fertilizer supply chains means that the conflict could indirectly affect China’s agricultural production costs by influencing energy prices and fertilizer supply chains.
Overall, the impact of the Middle East geopolitical conflict on the global rice market is manifested primarily in three areas: disrupted trade routes, divergent regional prices, and a restructuring of trade patterns. Its impact on the Chinese market is mainly indirect, transmitted through production costs.
I. Impact on the International Rice Market: Regional Fragmentation and Trade Restructuring
(A) Blocked Export Route from India to the Middle East
The Middle East has long been the most crucial export market for Indian Basmati rice. According to data from the Indian Rice Exporters Federation, five countries—Iran, Saudi Arabia, Iraq, the United Arab Emirates, and Yemen—together account for approximately 50% of India’s total Basmati rice exports. Simultaneously, India contributes over 70% of global Basmati rice production, giving it a dominant position in the international market. This trade structure creates a high degree of spatial concentration along the “India production – Middle East consumption” corridor.
Within this framework, shipping security becomes a critical factor for trade stability. The Strait of Hormuz is one of the world’s most vital maritime routes for energy and trade, serving as a key artery for Indian agricultural exports to the Middle East. As regional conflicts escalate, security risks around the strait have risen significantly. Some international insurers have suspended coverage for vessels on these routes, forcing shipping companies to increase risk premiums and leading to a notable rise in freight costs.
In response to the increased shipping risks and insurance costs, the Indian Rice Exporters Federation has advised its members to stop using CIF (Cost, Insurance, Freight) trade terms and switch to FOB (Free on Board) terms to shift the transportation risk to importers. However, importers have limited capacity to bear these risks, leading to a significant slowdown in new orders.
As of early March, approximately 400,000 metric tons of Indian Basmati rice were in a state of limbo. About half of this volume (200,000 tons) had not yet been shipped, while the remaining 200,000 tons were in transit but unable to dock at their intended ports. Some cargo is stranded in port warehouses, while other shipments remain at sea awaiting improved security conditions. Concurrently, new orders have largely been suspended, and the execution of existing contracts is being affected to varying degrees.
In the short term, this disruption to the trade route will create periodic pressure on the Indian export system and may also redirect some trade flows.
(B) Divergent Price Trends in Exporting and Importing Countries
Following the disruption of the trade chain, a clear divergence in price trends has emerged between India and the Middle East market. This phenomenon illustrates the differing supply-demand impacts of the trade interruption.
First, in the Indian domestic market, Basmati rice is a quintessential export-oriented agricultural product. Over three-quarters of its production relies on international markets. When export channels are blocked, the supply intended for export is forced back into the domestic market, which struggles to absorb the surplus in the short term.
Currently, domestic Basmati rice prices in India have fallen by approximately 5% to 6%. As inventories accumulate, prices may continue to decline in the coming weeks. Additionally, payments for about 45% of export orders have not yet been collected, putting financial pressure on some exporting companies. The trade disruption is thus impacting not only agricultural prices but also the liquidity of the industry chain.
Second, in the Middle East importing market, local climatic conditions limit rice production, creating a high dependence on imports. Basmati rice is a staple variety for local consumers, making its supply chain particularly sensitive to price fluctuations.
In the short term, the approximately 400,000 metric tons of cargo currently in transit will still arrive, which could alleviate some immediate supply pressure. However, rising transportation costs and the suspension of new orders are strengthening market expectations of a future supply gap. Some importers in Middle Eastern countries have already begun procuring alternative rice varieties to prevent inventory shortages.
Currently, Basmati rice prices in the Middle East are showing an upward trend. If the conflict persists and leads to long-term restrictions on shipping through the Strait of Hormuz, the volume of Middle East imports could shift from “stalled growth” to a “substantial contraction,” at which point upward price pressure would intensify.
(C) Restructuring of Trade Patterns
Given the disruption of the traditional trade route, the global rice trade pattern is likely to undergo a periodic adjustment.
First, some traditional exporting countries may increase their supply to the Middle East market. Vietnam, Thailand, and Pakistan are all major global rice exporters with competitive advantages in price and transportation distance. The International Grains Council (IGC) projects that Vietnam’s rice exports will reach 8.5 million metric tons in the 2025/26 season, an increase of about 2.4% year-on-year, indicating some capacity for additional supply.
Second, Pakistan has been a fierce competitor in the Basmati rice market with India in recent years. Although its export share has declined, its export competitiveness is recovering, supported by tax rebate policies and a favorable exchange rate. If Indian exports face long-term hurdles, Pakistan is well-positioned to fill part of the supply gap in the Middle East market.
Furthermore, some Middle Eastern countries may increase imports of ordinary aromatic rice from Thailand and Vietnam to offset the uncertainty in Basmati rice supply. This could drive certain shifts in global rice trade flows. However, on a global scale, the stranded volume of approximately 400,000 metric tons represents only about 0.67% of total global rice trade, meaning the overall impact on global supply-demand fundamentals is limited.
Thus, the impact of the current conflict on the global rice market manifests more as a regional restructuring of trade rather than a global supply shock.
II. Impact on the Chinese Rice Market: Limited Direct Transmission, Indirect Pressure Exists
(A) Rice Imports: Minimal Direct Impact
China is one of the world’s largest rice producers, and rice holds a critical position in the country’s grain consumption structure. Over the long term, China has maintained a high self-sufficiency rate for staple grains by enhancing agricultural productivity and refining its grain reserve system. The current self-sufficiency rate for staple grains remains above 95%, ensuring a stable overall rice supply.
China’s rice imports are primarily used for varietal diversification and regional supplementation. The sources of these imports are concentrated in neighboring countries such as Vietnam, Thailand, and Pakistan, with a low dependence on Indian Basmati rice. Consequently, the conflict in the Middle East does not directly affect China’s rice import volume or create a significant shock to the domestic market’s supply-demand balance.
(B) Import Costs: Potential Relative Advantage
Regarding shipping costs, China’s rice imports from Southeast Asian countries primarily travel through the South China Sea and the Strait of Malacca, bypassing the conflict-sensitive Strait of Hormuz. While risk premiums have increased shipping costs for Indian exports to the Middle East, the maritime transport costs for China’s imports from Southeast Asia remain relatively stable. This could provide Chinese importers with a potential cost advantage and greater bargaining power under comparable conditions.
(C) Agricultural Production: Need to Monitor Fertilizer Cost Transmission
The Middle East plays a critical role in the global fertilizer supply chain. Iran is the world’s second-largest urea exporter and a major producer of key fertilizer raw materials such as sulfur and ammonia. Disruptions to shipping through the Strait of Hormuz could affect global fertilizer trade flows and push up international prices. Some fertilizer products are already showing signs of price increases; for instance, Egyptian urea FOB prices have risen by about 5%. If the conflict persists, global fertilizer prices could rise further. Although China has significant domestic fertilizer production capacity, it still relies on imports for some raw materials. Rising international fertilizer prices could be transmitted to the domestic agricultural input market through trade channels, thereby increasing the cost of rice cultivation.
(D) Spring Plowing Fuel: Seasonal Upward Pressure on Diesel Prices
Energy prices are a significant component of agricultural production costs. Domestic refined oil product prices in China have already experienced three consecutive increases since February 24, with diesel prices rising by RMB 170 per ton. As spring plowing preparations enter a critical phase in March, the demand for agricultural machinery will surge, leading to concentrated diesel consumption and potential seasonal price increases. If the Middle East conflict continues to push up international crude oil prices, domestic refined oil prices may face further adjustments, adding to agricultural production costs. However, in terms of overall supply, domestic diesel inventories are ample, and the mechanism for guaranteeing diesel supply for agricultural use is well-established, which could mitigate the impact of short-term price fluctuations on agricultural production.
III. Conclusion
Overall, the impact of the Middle East geopolitical conflict on the global rice market is distinctly regional and structural in nature. At the global level, the rice market is currently in a phase of synchronized growth in both production and inventories. This provides a buffer against the supply shocks caused by geopolitical tensions, meaning the primary impact will be a restructuring of regional trade patterns rather than a global food shortage.
At the international trade level, the conflict’s effects are primarily transmitted through the disruption of the India-Middle East Basmati rice trade corridor. Increased shipping risks have led to cargo backlogs, causing prices to fall in India due to domestic supply buildup, while the Middle East import market faces upward pressure from higher transportation costs and anticipated supply tightness. This regional price divergence will likely drive a periodic adjustment in global trade flows.
For the Chinese market, rice supply is not directly impacted due to the country’s robust domestic production capacity and diversified import sources. However, attention must be paid to the indirect effects transmitted through the prices of agricultural inputs like energy and fertilizers.
In conclusion, the impact of the current conflict on the global rice market is rated as medium to low in severity, mainly concentrated on specific rice varieties and regions. Its impact on the Chinese market is relatively limited, primarily felt through agricultural production costs.
In a context of rising global supply chain uncertainty, maintaining stable domestic grain production capacity, improving grain reserve systems, and diversifying import sources remain crucial foundations for ensuring national food security. At the same time, continued monitoring of the transmission mechanisms of geopolitical risks on agricultural input prices is essential to enhance the resilience of the agricultural system against external shocks.
