Global food markets are facing a fresh bout of uncertainty as geopolitical tensions, weather disruptions and rising energy and fertiliser costs threaten to push food inflation higher, while financial markets appear to be positioning for a potential supply shock. International financial institutions, including Goldman Sachs, HSBC, Bank of America and JPMorgan Chase, have recently warned that a combination of risks could trigger another round of global food inflation.

In a report titled Food Security Is National Security: A Compounding Storm, JPMorgan senior global economist Nora Szentivanyi warned that disruptions to shipping through the Strait of Hormuz, combined with a potentially severe El Niño, could reduce crop yields, constrain agricultural production and keep food inflation elevated through the first half of 2027.

According to the report, global food inflation could rise from 2.8% in the first half of 2026 to 5% in the same period next year, adding an estimated 0.6 percentage points to overall inflation. The impact is expected to be particularly severe in emerging economies across Asia, Africa and Latin America, where food accounts for a larger share of household expenditure and agricultural production is more vulnerable to extreme weather. The report cited estimates that around 645 million people went hungry last year, while approximately 2.1 billion experienced moderate or severe food insecurity.

The latest warnings have also been reflected in financial markets. Agricultural shares on China’s A-share market have surged, with several companies hitting daily trading limits, while food-related exchange-traded funds have also gained. That sharp market reaction raises a broader question: are financial markets simply anticipating a genuine food-supply crisis, or could speculative capital itself amplify the fears and help turn a potential crisis into an actual one?

There is little doubt that the global food system is under pressure. The Russia-Ukraine war continues to disrupt agricultural and energy markets, while tensions in the Middle East have affected shipping and energy supplies. Disruptions around the Strait of Hormuz are particularly significant because the waterway is an important route for energy and fertiliser-related trade. Higher energy prices feed directly into agricultural costs through fuel, transportation and fertiliser production.

Restrictions affecting Russian natural gas supplies have added to concerns over the availability and cost of feedstocks used to manufacture nitrogen fertilisers. Any sustained increase in fertiliser prices can eventually translate into higher production costs for farmers and, ultimately, higher food prices.

Weather is another major source of uncertainty.

An exceptionally strong El Niño can disrupt rainfall patterns and temperatures across major agricultural regions. The United Nations World Food Programme has estimated that the current event could push an additional 49 million people into acute food insecurity.

At the same time, inadequate storage infrastructure in some countries limits their ability to absorb sudden supply shocks. Water shortages are constraining irrigation in several regions, while food wastage continues to undermine effective global supply.

War, weather, water scarcity, inadequate reserves and food waste are therefore interacting in ways that could leave the global food system increasingly vulnerable.

But a heightened risk does not necessarily mean a global food crisis is inevitable. What warrants closer scrutiny is the role of financial capital in amplifying fears surrounding food supplies.

The experience of the 2007-08 food-price crisis offers an important lesson. While crop failures, rising demand and biofuel production contributed to upward pressure on prices, some researchers have argued that speculative activity in commodity markets significantly amplified the surge.

One study argues that speculation played a decisive role in the food-price bubble of 2007-08. It notes that the Food and Agriculture Organisation’s food price index rose 71% in just 15 months between the end of 2006 and March 2008 before falling sharply after July 2008.

The study contends that longer-term factors such as rising demand in emerging markets, stagnant production and increased use of agrofuels could not alone explain such a rapid rise and subsequent collapse. It points instead to the growing participation of institutional investors, including index and hedge funds, in commodity markets.

As the global financial crisis intensified towards the end of 2007, investors moved substantial amounts of capital into commodities, including oil and agricultural products. According to the study, this influx accelerated existing price increases and contributed to the formation of a speculative bubble.

The debate over the precise contribution of speculation remains contested. But there is little doubt that financial markets can influence expectations, and expectations can themselves affect physical markets.

Speculators do not necessarily need to acquire large quantities of grain to influence prices. Expectations of future shortages can encourage traders, farmers and governments to alter their behaviour.

When futures prices rise sharply, farmers and traders may choose to hold back supplies in anticipation of higher prices. Governments worried about domestic shortages may restrict exports, while importing countries may rush to build inventories.

Individually, each response may appear rational. Collectively, however, they can tighten supplies available on international markets and push prices even higher. In this way, a shortage that initially exists mainly in expectations can acquire a physical dimension.

This is why speculation in food commodities matters beyond financial markets. Higher grain prices can have a disproportionate impact on poorer countries, where households spend a large share of their income on food.

The 2007-08 price surge contributed to severe hardship in developing countries and triggered food-related unrest in several parts of the world.

The lesson from that episode is not that every warning issued by financial institutions should be dismissed. Rather, it is that warnings themselves can influence market behaviour when they coincide with large pools of speculative capital.

The challenge for policymakers is therefore to distinguish between legitimate risk assessment and market activity that amplifies fear for financial gain. One of the strongest defences against such volatility is maintaining adequate food supplies and strategic reserves.

Countries that have experienced repeated supply shocks are increasingly seeking greater food security and, in some cases, greater self-sufficiency.

China, for example, has continued its policy of increasing grain production through improved agricultural technology and maintaining substantial reserves. The country has strengthened its cereal production capacity while seeking to ensure security of staple grains.

Brazil has also placed greater emphasis on food sovereignty and expanding agricultural production. The European Union has revived discussions over strategic food reserves, while countries in Southeast Asia are exploring longer-term rice trade arrangements to reduce vulnerability to sudden disruptions in international markets.

Several African countries are similarly seeking to raise agricultural productivity and reduce dependence on volatile global food markets.

These measures could provide an important buffer against both genuine supply disruptions and speculative price swings.

The latest global production figures also offer some reassurance.

According to the FAO’s July 2026 forecast, global cereal production is expected to reach 2.983 billion tonnes this year. Although slightly below the record level recorded in 2025, it would still represent the second-highest production level on record.

Global cereal stocks at the end of the 2026-27 season are forecast at 957.8 million tonnes, an increase of 8.2 million tonnes from the previous year. These figures suggest that the world is not currently facing an unavoidable shortage of basic grains.

That does not mean the risks can be ignored. A major weather event, prolonged geopolitical disruption or a sharp increase in energy and fertiliser costs could quickly alter the outlook. But abundant production and inventories provide governments with valuable room to respond before panic takes hold.

The central lesson is therefore one of vigilance rather than alarm.

Governments need to strengthen food reserves, improve storage infrastructure, invest in agricultural productivity and protect vulnerable populations from sudden price increases. At the same time, regulators need to keep a close watch on commodity markets to ensure that excessive speculative activity does not turn genuine concerns about food security into self-fulfilling crises.