Goldman Sachs has identified a combination of factors that could trigger a significant food supply shock in Southeast Asia.

The investment bank suggests that rising crude oil and fertilizer production costs, coupled with the potential for a strong El Niño event in the latter half of 2026, are likely to push food prices higher.

These multiple pressures could cause regional food inflation to climb an additional 2.1 percentage points over the next 12 months on top of existing trends.

Net food importers like Singapore and the Philippines are expected to feel the initial brunt of the price shock, though the entire region will be affected by rising costs.

Economist Muhammad Faiz Nagutha noted that food spending constitutes a high proportion of total consumption for residents in countries like Indonesia, the Philippines, and Vietnam compared to other nations.

A report from Goldman Sachs indicates that Southeast Asia may face a food supply shock, with the conflict in the Middle East driving up crude oil and fertilizer prices, and a strong El Niño weather event likely in late 2026, which will sustain upward pressure on food prices.

Goldman Sachs stated that the oil price shock stemming from the Middle East conflict is already evident in fuel-sensitive consumer price index categories, while higher fertilizer prices will increase agricultural production input costs, forcing Southeast Asian governments to reassess the balance between food and energy subsidies.

The bank added that just as cost pressures from oil and fertilizers work their way through the food supply chain, a strong El Niño event in late 2026 could trigger another round of food supply crisis.

Within Southeast Asia, Goldman Sachs believes Singapore and the Philippines, as net food importers, will directly bear the impact of global food price volatility.

The report notes that other countries in the region are also vulnerable to food price shocks. While Malaysia and Indonesia may appear more resilient due to their palm oil industries, excluding this sector, both countries are also net food importers.

Goldman Sachs specifically highlighted that Thailand imports over 90% of its fertilizer, making it highly susceptible to global food price shocks due to rising costs for agricultural production inputs.

Research from the London School of Economics and Political Science suggests that pressure from fuel shortages related to the situation in Iran is likely to translate to the food sector. Energy is a core cost in the production and transportation of commodities like food, and oil price fluctuations can rapidly propagate down the supply chain.

A report from the OECD mentioned that sustained disruptions in crude oil supply could further push up fertilizer prices in the Middle East region, even causing shortages. This could affect crop planting and harvest cycles for the 2026-2027 season, leading to reduced food production and consequently higher food prices in the medium to long term.

Goldman Sachs estimates that the combined impact of oil price volatility, fertilizer price increases, and El Niño would lead to an average additional food inflation increase in Southeast Asia of 1 percentage point after six months, 2.1 percentage points after 12 months, and a slight easing to 2 percentage points after 18 months.

The report clarifies that these figures represent the additional inflationary pressure on top of the normal trajectory of food inflation and are not a forecast for the overall food inflation rate.