Tensions in the Black Sea and regional droughts spark rising global wheat prices

The ongoing geopolitical tensions in the Black Sea and drought conditions across the Northern Hemisphere have led to rising global wheat prices, according to recent reports. Following the Russian invasion of Ukraine in early 2022, wheat prices peaked, but they have since fallen over the past four years. However, recent events have triggered a resurgence in wheat price volatility.

The U.S.-Israeli attacks on Iran in early 2026 led to the closure of the Strait of Hormuz, causing energy and fertilizer prices to surge. However, the impact on grain prices was minimal, as grain exports were relatively unaffected and fertilizer impacts would not affect grain production for several months.

Despite this, concerns have emerged regarding the impact of widespread drought on crop conditions in the Northern Hemisphere. Additionally, tensions in the Black Sea have escalated, posing yet another threat to wheat supplies. As a result, wheat prices have surged approximately 25% above their January 2026 levels, reaching their highest point in two years.

Recent events have severely disrupted Ukraine's grain exports, with missile attacks on Odesa's ports and drone attacks on vessels in the Sea of Azov halting shipments through the Kerch Strait. Similarly, attacks on Russian Black Sea ports such as Novorossiysk and Taman have increased shipping costs out of these areas. Consequently, total shipments out of the Black Sea in late July were down more than 40% compared to the previous year.

Russia and Ukraine together accounted for around 32% of global wheat trade in the 2025/26 season, with most of this trade passing through the Black Sea. Prior to the Iran war, wheat price volatility had been relatively low, remaining below the 10-year average. However, the closure of the Strait of Hormuz led to increased volatility, which decreased following the prospects of a lasting ceasefire.

Since July 1, market volatility has once again increased due to smaller-than-expected global crops and heightened tensions in both the Black Sea and Persian Gulf.

The USDA estimates that combined production of top wheat exporters, accounting for approximately 84% of the total, will decline by 11% for the 2026/27 marketing year. Exports are also expected to decrease by 7% compared to last year's levels. North America, Canada, the EU, Australia, and Argentina are all facing reduced wheat production due to drought conditions or geopolitical factors, with the latter two potentially benefiting from El Niño's increased rainfall in the coming months.

However, the conflict over shipping routes in the Black Sea remains uncertain, leaving the future of wheat exports and market stability unclear.