Most discussions about the Strait of Hormuz begin and end with oil. That is understandable. Roughly a fifth of the world’s seaborne oil trade passes through this narrow stretch of water each day, making it one of the most strategically important shipping routes on the planet. Yet for coffee professionals, focusing solely on oil risks missing the bigger story. The greatest impact of a disruption in Hormuz may not be what happens to energy markets themselves, but how those effects cascade through global supply chains and eventually find their way into the coffee industry.
The reality is straightforward: coffee does not pass through the Strait of Hormuz, but many of its costs do.
When geopolitical tensions rise in the Gulf region, market participants naturally focus on crude oil prices first. History shows that energy markets react quickly to real or perceived threats to supply. As traders attempt to price in risk, volatility often increases and energy prices can move sharply higher. The effects, however, rarely remain isolated within the energy sector. Instead, they spread through transportation, manufacturing, agriculture and consumer markets.
To understand why this matters for coffee, it is useful to think in terms of second-order effects.
Coffee is often discussed as though it exists within its own ecosystem, driven by weather, crop sizes, certified stocks and futures markets. While these factors are undoubtedly important, coffee is also part of a far larger global economic system. Any major disruption that materially affects inflation, freight costs or agricultural inputs will eventually make itself felt somewhere within the coffee value chain.
Let’s begin with freight.
Modern shipping runs on fuel. If oil prices rise following disruption in Hormuz, bunker fuel costs for vessels tend to increase. Shipping companies rarely absorb these higher costs indefinitely. Instead, they are passed through the supply chain via surcharges, higher freight rates and increased transportation costs.
For coffee importers, this can mean more expensive ocean freight from producing countries to consuming markets. The impact may not be immediate, nor will it affect every origin equally. However, a prolonged period of elevated energy prices increases the likelihood that coffee arrives at destination carrying a higher logistics bill than before. The physical coffee may be unchanged, but the cost of moving it around the world has increased.
Marine insurance can also become a factor.
Periods of geopolitical uncertainty often result in higher insurance premiums for vessels, particularly when conflict risks increase around strategically important waterways. These costs may appear distant from a coffee farm in Honduras or a warehouse in the UK, but global logistics networks are highly interconnected. Additional costs entering the transport system have a habit of finding their way through supply chains over time.
The impact of Hormuz on fertiliser may be even more significant.
Many fertiliser products are closely linked to energy markets. Natural gas is a critical feedstock in the production of nitrogen-based fertilisers, and the Gulf region plays an important role in global energy supply. When energy markets become unsettled, fertiliser markets often follow.
Coffee producers have experienced this before.
When Russia invaded Ukraine in February 2022, fertiliser markets reacted sharply. The conflict disrupted a region that plays a vital role in global fertiliser and agricultural supply chains. At the same time, natural gas prices surged, increasing fertiliser production costs around the world. The result was a dramatic increase in fertiliser prices that rippled across agricultural markets, including coffee.
Coffee producers from Peru to Honduras suddenly found themselves facing substantially higher input costs. Difficult decisions had to be made. Some reduced fertiliser application. Others delayed investment. Many had to reconsider production budgets entirely.
What makes today’s situation particularly noteworthy is that it starts from a much more fragile position.
In 2022, fertiliser prices surged from what was, relatively speaking, a more normal operating environment. Today, many coffee producers are already grappling with the legacy of previous input shocks, elevated financing costs, labour shortages and increasing climate variability. The resilience of the sector has already been tested.
This means any disruption that materially affects energy markets in the Gulf may be felt more acutely than it would have been a few years ago. Producers have less room for manoeuvre. For many farmers, fertiliser use has already been optimised or reduced following previous periods of high prices. If costs were to rise sharply again, the scope for further adjustment becomes increasingly limited.
The relationship between fertiliser and coffee prices is not always immediate, but it is important. Commodity markets frequently focus on today’s harvest while underestimating the impact of today’s decisions on tomorrow’s crop.
Inflation is another transmission channel that deserves attention.
Higher energy prices tend to create inflationary pressure throughout the wider economy. Transportation becomes more expensive. Manufacturing costs rise. Businesses pay more for energy-intensive activities. Households face higher living costs.
At first glance, this may seem disconnected from coffee. Yet coffee is ultimately a consumer product. While many people view their daily cup as essential, purchasing behaviour can still change when household finances come under pressure.
In an inflationary environment, consumers may trade down, buy less frequently or become more price sensitive. Roasters and retailers can find themselves navigating a difficult balancing act, absorbing rising costs on one hand while managing resistance to higher prices on the other.
This is where coffee’s indirect exposure becomes particularly apparent.
Unlike crude oil, coffee faces no direct transit risk through Hormuz. There are no coffee vessels waiting to pass through the Strait on their journey from Brazil, Colombia or Ethiopia. However, coffee remains exposed through multiple cost channels simultaneously: freight, fuel, fertiliser, insurance, financing and consumer demand.
That distinction is important.
When analysing commodity risks, there can be a temptation to focus solely on direct exposure. Yet some of the most meaningful market impacts occur indirectly. A coffee buyer who only watches coffee fundamentals may miss broader developments that ultimately influence profitability just as much as a frost in Brazil or a poor harvest in Vietnam.
As we have seen repeatedly in recent years, commodity markets are becoming increasingly interconnected. A geopolitical event in one part of the world can quickly influence costs in another. Sometimes the connection is obvious. Sometimes it is not.
Thinking about Hormuz through this lens is therefore useful regardless of whether disruption ever materialises. It reminds us that risk management is not simply about understanding coffee. It is about understanding the broader systems within which coffee operates.
There are, of course, different possible outcomes.
A period of de-escalation would likely see many of these risks fade. Freight markets could normalise, energy prices could stabilise and inflationary pressures could ease. A prolonged period of tension, however, could keep energy costs elevated and continue to place upward pressure on supply chain expenses. In the most severe scenario, a significant disruption to traffic through the Strait could create a broader commodity shock extending far beyond energy markets alone.
The challenge for coffee businesses is not necessarily predicting which scenario will occur. Rather, it is understanding how each scenario could affect supply chains, cost structures and long-term planning.
The Strait of Hormuz is ultimately a reminder that coffee does not exist in isolation. From fertiliser on the farm to freight rates at sea and spending habits in consuming markets, coffee is linked to economic forces that stretch far beyond producing countries and coffee exchanges.
Coffee may not pass through Hormuz. But the costs of coffee most certainly do.
