If you are among coffee lovers, there are two key points that should be understood regarding the impact of the war in the Middle East on the Arab region, whether in terms of coffee futures prices or the widely consumed coffee prices in the region.

What is the first point?

Coffee production has not been directly affected by the war, as its main sources are not located in the Arab region or nearby conflict areas. Most of the supply comes from countries such as Colombia, Brazil, Ethiopia, and others.

Therefore, the sharp increases we saw over the past year, which exceeded 50 percent, were not a result of the war. They were mainly due to lower production caused by climate changes and weaker harvests, which led to a decrease in supply compared to demand.

At the beginning of this year, prices witnessed a noticeable decline of around 25 percent or more, as the price per pound dropped from about 4 dollars to below 3 dollars, with expectations of further decreases.

Coffee prices are affected by rising global transportation and insurance costs due to geopolitical tensions. (Freepik)

What is the second point?

The second point is the indirect impact of the war, through higher oil prices and tensions in shipping routes such as the Red Sea, along with the logistical disruptions that followed.

The rise in oil prices has significantly increased transportation costs. Companies have also been forced to use longer and more expensive alternative routes, which has led to delays in shipment arrivals.

In addition to all of this, what is known as the war premium has emerged. This refers to higher insurance costs for shipments due to increased risks, and it has also contributed to raising final coffee prices, which increased by around 5 percent.

Key takeaway

For consumers, current prices may seem relatively acceptable compared to the large increases seen last year. However, continued tensions or new disruptions in production in exporting countries could push prices up again.

Therefore, it may be wise for consumers to consider storing coffee in reasonable amounts, while investors and companies can rely on hedging tools to benefit from price fluctuations or reduce their risks.