Analysis: How Middle East conflict is already weighing on the global seafood market – Responsible Seafood Advocate

Rabobank analyst Gorjan Nikolik sees disrupted trade routes and changing market demand over time.

As the war rages in the Middle East, the economic consequences are spreading far beyond the region. Oil is moving sluggishly through the Strait of Hormuz – a narrow passage through which about a fifth of the world’s supply moves – driving up energy prices and straining global supply chains.

What starts in the energy market is felt elsewhere, as the Middle East is also a major center for fertilizers, petrochemicals, food products and food. The effects of the conflict are already being felt in daily costs. In the United States, gasoline prices have risen more than 20 percent in the past month, while diesel – the fuel used to transport food and goods – it jumped more than 30 percent.

According to an exclusive global analysis from Rabobank shared with Advocate but not publicly available, those pressures are already changing seafood markets, with effects expected to build over time.

“You have a direct impact – like the price of oil,” said Gorjan Nikolik, senior global seafood expert at Rabobank. “Then you have the effects that take time to enter the prices.”

Energy is expensive

The most immediate impact is energy. Fuel is a key component throughout the seafood value chain, from ocean liners to country farms. In wild fish, Nikolik noted that fuel represents 15 to 30 percent of operating costs in fisheries, with older and more powerful vessels, such as low-pressure trawlers, while pelagic midwater vessels and new, less fuel-efficient vessels are less affected.

Aquatic fish are also exposed, as energy is needed for pumping, ventilation and feeding, while the rising cost of fuel affects the price of essential equipment. To cultivate shrimp, Nikolik said, there are energy needs, specifically referring to the use of net wheels to install air ponds.

Fertilizer markets – closely linked to energy and supply in the Middle East – are also tightening, raising water supplies and production costs across the board.

“The Middle East is a major exporter of fertilizers, and it also uses certain compounds derived from hydrocarbons,” Nikolik said. “There’s a double whammy there.”

Global trade traffic is slowing

Slow motion adds another layer of pressure. Air restrictions and rerouted flights increase costs and transit times for seafood shipments, especially for fresh, high-quality produce.

“Europe sends a lot of seafood to Asia by air – from Norway, Scotland, the Faroe Islands,” said Nikolik. Now it is very expensive but it also has a problem.

For exporters, where speed and innovation are important, those barriers can quickly turn into higher costs or reduced market access.

“Some routes are still manageable – like the North Pole to Japan,” Nikolik said. But getting to South China, Singapore or Hong Kong is more difficult.

As ships take longer and less accessible routes, capacity increases – potentially raising costs.

“When you have a capacity problem, you have a cost problem,” Nikolik said.

The price impact will be slow, long

Although fuel costs have increased immediately, the effects on seafood prices are expected to emerge gradually, working through the supply chain over time. Production cycles alone can slow down the impact.

“Shrimp is about three to five months, but salmon is three years,” Nikolik said. Even tuna caught today can go through wholesale and distribution for up to a year before it can be processed and reach consumers.

The nature of the industry means that price increases are not passed on immediately. Instead, they tend to flow – from producers to processors to consumers – often lagging behind existing contracts.

“One part of the value chain receives the price impact, partially transmits it, and later the contracts reflect the full price,” said Nikolik. “Even retailers, depending on the product, can reset prices several times a year. That’s a very long time.”

That swing process can stretch the impact over several years, making prices slower but more persistent.

“It’s almost like a wave,” Nikolik said. “That’s how we see the effect.”

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Demand for seafood may decrease

Rising costs can weigh on demand, as higher fuel and food prices eat into consumer incomes, especially in price-sensitive markets. Seafood tends to respond quickly to those pressures.

“If people are pushed into their wallets, there’s a lot of money,” Nikolik said. “You often see a shift from fresh seafood and restaurants to less expensive options.”

Tourism – another key driver of seafood demand – is also expected to decline as travel becomes more expensive and less well-known. “More expensive flights mean less tourism,” Nikolik said.

Taken together, the combination of rising costs and weak demand creates a tougher outlook for the seafood sector.

“You have inflation combined with high prices, but at the same time, there is a drop in demand,” Nikolik said. “If you add it, the feeling can be very bad.”

While some impacts are already visible, others are still working their way through the system – and may continue to do so for years.

“We’re thinking about the potential global impact three, four, five years from now,” Nikolik said.

But could continued pressure on fuel costs push the industry towards renewable energy? As fuel prices rise, the same conscience has accelerated investment generating electricity and other energy. For seafood, where oil is very expensive, that pressure could gradually change the way products are harvested, grown and transported.

And while the outlook remains bleak, the seafood industry has shown it can change.

“If energy costs remain high, companies will look for ways to reduce that exposure,” Nikolik said. “The industry is very innovative – they will find ways to adapt.”