Middle East tensions may push up food prices in Uzbekistan, Central Bank official says

Inogamov, Director of the Monetary Policy Department at the Central Bank of Uzbekistan, said that rising tensions are driving up global oil prices and logistics costs. This trend is primarily reflected in higher fuel and food prices.

Commodity prices and inflation risks

“Trade tensions between major economies that began last year, along with the recent escalation in the Middle East, are affecting us primarily through global commodity prices. Amid the situation in the region and risks of a possible disruption in the Strait of Hormuz, global oil prices have risen sharply. This, in turn, is affecting a wide range of global prices,” he said. “Most notably, fuel prices are rising sharply. There is also a strong link between oil and food prices globally. As a result, prices may continue to increase in the coming months”.

Inogamov noted that mineral fertilizers play a key role in food production, and their production depends on oil and fuel. Rising fuel costs ultimately lead to higher food prices.

Logistics and trade routes

The Central Bank official also highlighted another factor that could significantly affect Uzbekistan.

“Several Iranian ports serve as transit corridors for Uzbekistan. Through these routes, we conduct imports and exports with countries such as Pakistan, India, and the Gulf states. The closure of these corridors would require establishing alternative routes, which could lead to delays and higher costs, including transportation expenses. As a result, this could also put upward pressure on domestic prices,” he said.

Risks to food markets

Inogamov cited forecasts from United Nations experts, saying that if the situation in Iran persists into the summer, global food prices could rise, and shortages may emerge.

“If oil prices increase, production of alternative fuels is likely to expand. For example, ethanol – an alternative to gasoline – is mainly produced from sugar feedstock. Greater use of ethanol could push up sugar prices, as raw materials are diverted from food production to fuel. Such dynamics increase costs for both food production and alternative inputs. This is why the World Bank and the International Monetary Fund have raised concerns,” he noted.

Escalation and market reaction

On February 28, the United States and Israel launched missile strikes on Iran, with explosions reported in Tehran and other cities. Iran responded with strikes on Israel and later on U.S. military facilities in Qatar, the United Arab Emirates, Bahrain, and Jordan. The conflict is ongoing.

Global oil prices have risen above $100 per barrel for the first time since 2022 amid the hostilities. Economists warn that potential disruptions to trade and logistics could weigh on Uzbekistan’s economic growth, while the Central Bank says geopolitical tensions are adding to inflationary pressures through higher prices.

Monetary policy and gold

Against this backdrop, the regulator kept its key interest rate unchanged at 14%. At the same time, higher gold prices could partly offset the negative impact, as gold accounts for roughly one-third of Uzbekistan’s export revenues.