The System Is Inside the Crisis

What the new Mercy Corps report from Hormuz to the Frontlines of Hunger reveals about the structural limit this war exposed

Most humanitarian crises I have worked on in 15 years shared one structural feature. The system stood outside the problem and delivered into it. Typhoon in the Philippines, teams fly in from hubs that are functioning. Famine in the Horn, food moves through supply chains that are intact. Refugee crisis in Greece, the money comes from economies that are growing. The system works best when it occupies a different economic space from the people it serves.

This morning the Mercy Corps Crisis Analysis Team published From Hormuz to the Frontlines of Hunger, a 39-page synthesis tracing how the war's economic shocks have reached six fragile contexts through five transmission channels. Holly Topham and her team led the work. I worked alongside them on the analysis. It is one of the most comprehensive operational evidence bases published on the secondary impacts of this war.

The full report is at https://www.mercycorps.org/research-resources/hormuz-to-hunger. I strongly recommend that, if you are reading this, you take the time to download and read the full report.

The report documents fuel, fertiliser, shipping, currency and remittance transmission into Sudan, Somalia, Ethiopia, Pakistan, Myanmar and Lebanon. But read across those channels and a deeper finding emerges that the report itself does not state explicitly. Most institutional analysis on this war produces sectoral diagnosis: fuel prices here, shipping costs there, food security projections in isolation. What is missing, and what many practitioners in the field are asking for, is the consolidated compounding picture. What happens when all five channels fire at once, into the same populations, against a funding base that was already severely depleted.

This is not simply a commodity-price crisis. It is a cascading affordability and access crisis. Food, fuel, fertiliser, cash and aid may still technically exist. The problem is that more of them are failing to reach the people who need them at a viable cost.

That matters because the humanitarian system is being hit by the same shock as the populations it serves. Its freight, fuel, insurance, procurement, aviation and donor funding are all exposed to the same economic disruption. The system is not outside the crisis delivering into it. It is inside the crisis. And the sector has very little doctrine for that.

Two weeks ago, in "Seven Propositions for the Next Eighteen Months", I argued that the humanitarian architecture is contracting unevenly and that the settlement emerging will be smaller, harder and more politically conditioned. In March, I argued that the blast radius of this war would be measured not in kilometres, but in currencies, commodities and the compression of lives already at the margin. This piece is about the mechanism accelerating that contraction. The Iran war did not create the structural limit. It exposed it. The Mercy Corps report now gives those arguments a country-level evidence base.

Four findings from the report make the case.

One. The system's supply chains share the same chokepoints as the economies they serve.

Ethiopia imports more than 90% of its fuel through a single corridor via Djibouti, at the point where Gulf, Red Sea and Horn of Africa shipping routes converge. The Ministry of Trade confirmed on 2 April that more than 180,000 metric tonnes of fuel in the procurement process had failed to arrive. Daily diesel supply was cut from 9.2 million litres to 4.5 million. The government issued a rationing directive. This is not a price shock. It is a physical supply failure. And the corridor through which humanitarian cargo moves is exposed to the same failure.

Somalia is caught in a particularly acute pincer: Hormuz to the east, Bab el-Mandeb to the west, no alternative routing that restores normal cost, speed or reliability. Sudan's Port Sudan, the only functioning international port since Khartoum's transit infrastructure was destroyed in 2023, now carries both the pre-existing Red Sea war-risk premium and the new Hormuz-driven freight costs.

The documented logistics costs are specific. WFP had 70,000 metric tonnes of food affected by war-related disruption as of 31 March. One shipment from South Korea to Tajikistan was rerouted around the Cape of Good Hope to Georgia and then by road. Three extra weeks. $500,000 added to a single delivery. Save the Children reported $600,000 in medicines for Sudan stranded due to shipping disruption, putting more than 90 healthcare facilities at risk. Air freight costs for Afghanistan nutrition supplies that would normally have moved overland through Iran hit $240,000.

These costs are landing on a WFP whose annual income fell from more than $14 billion in 2022 to around $6.4 billion in 2025. The system did not lose access everywhere. It lost the assumption that its supply chain would remain faster, cheaper and more reliable than the crisis environment it was serving. That assumption is what made the external-delivery model work. And it no longer holds across key corridors.

Two. The next harvest shock is being written now.

The FAO Chief Economist warned that disruption beyond 40 days triggers farmer behavioural responses, reduced fertiliser application, crop switching, smaller planted areas, with consequences that carry through the 2026 and 2027 harvests. The ceasefire was announced on 7 April. The 40-day threshold was crossed on 9 April. Two days into the ceasefire window.

Global urea went from $392.50 per tonne in December to $725.63 in March. An 85% rise. The Somali Gu, Ethiopian belg and Meher, and Pakistani kharif planting seasons are active right now against that cost base. The Meher season accounts for more than 80% of Ethiopia's annual cereal output. Its sowing window opens through May and June. Many farmers making fertiliser decisions in the next six weeks are doing so against a cost base that has nearly doubled. Those decisions will shape what their families eat in October.

The report correctly flags what is probably the most important operational data gap in the analysis: there is no published weekly agrodealer retail fertiliser price series in any of the six case countries. We know what the global benchmark did. We do not know with precision what farmers are actually paying at the local dealer.

The food security consequences of this war are being written into harvests that have not yet been planted. No ceasefire reverses planting decisions already made. And this is not only happening in fragile importing countries. That is the double blade. Fragile countries face weaker domestic production because their own farmers cannot afford fuel, fertiliser, irrigation and transport. Then they may face higher global import prices if richer producing regions respond to the same cost squeeze by cutting fertiliser use, switching crops or reducing acreage. The countries with buffers may absorb it through credit, subsidy or price support. The countries without buffers absorb it through lower diet quality, distress sales, migration, school withdrawals, debt and hunger.

The system may be asked to respond to the resulting food-security deterioration later this year with a cost base that has also been repriced by the same shock that helped produce it.

Three. The transfer instrument can fail before the transfer value does.

In mid-April, Mogadishu markets started refusing Somali shilling notes altogether, demanding US dollars or mobile money. The Banadir Regional Governor issued an enforcement order on 17 April. Major markets reportedly resumed accepting the 1,000-shilling note within days. But the underlying drivers, physical condition of the notes, weak confidence, dollarisation, mobile-money dominance, are all unresolved.

The shilling barely moved in exchange rate terms. This was not a devaluation. It was a rejection of the transfer instrument itself. I have been programming and analysing cash for more than a decade and I had not considered this specific failure mode in the context of second-order war transmission. A standard transfer value adjustment does not fix a situation where the market will not accept what you are giving people. The report is right to name specific modality alternatives: EVC Plus, ZAAD, e-Dahab, USD cash where conditions permit.

The broader purchasing power erosion documented across the case set reinforces the point from a different direction. Global oil prices partially corrected from their March peak. Retail fuel in the case countries did not follow them down. Pakistan's retail petrol stayed well above pre-war after two rounds of government subsidies. Sudan's parallel-market gasoline rose 67% in a single week. Myanmar diesel surged more than 160%. Prices follow benchmarks up within days but take weeks or months to fall. The same asymmetry is likely playing out in the system's own cost base. Procurement, freight, insurance, all repriced upward, unlikely to unwind as quickly as benchmark prices.

Cash programming in this environment has to ask four questions at once. Is the transfer value adequate against the post-war basket? Is the transfer currency accepted in the market? Is the delivery channel liquid and functional? And is the cost of delivering the transfer itself rising faster than the programme budget allows? That is a very different operating problem from ordinary inflation adjustment.

And it is where the interoperability argument comes back. When every dollar buys less, duplicated systems, fragmented registration, parallel delivery channels and modality silos are not administrative irritants. They are affordability failures. Money lost to fragmentation is assistance that does not arrive. And this is why payment infrastructure belongs in the core response conversation, not at the edge of the innovation agenda. If currency acceptance, liquidity and transfer rails fracture, assistance can fail even when budgets and beneficiary lists exist.

Four. The funding base is shrinking as the cost base rises.

Sudan's HRP is 18.8% funded. Somalia is at 14.3%. The combined unfunded gap across four plans exceeds $3.9 billion. US contributions to Somalia went from $462 million in 2024 to $67.4 million in 2025 to $2.9 million year-to-date in 2026. The Bureau of Disaster and Humanitarian Response, which replaced USAID, has roughly 200 staff against the former BHA headcount of more than 1,000.

Per-person funding in Sudan sits at $16.15 for the year. In Myanmar, $16.69. In Lebanon, $117. A seven-fold gap. These are not abstract budget lines. Sixteen dollars per person per year is not a response envelope. It is a rationing mechanism. It means choices about who is reached and who is not are made not by need, but by the arithmetic of scarcity. Once appeals are calibrated to donor appetite rather than total need, the system is no longer only reporting scarcity. It is operationalising it. The Hormuz shock adds a second turn: even the reduced ambition now buys less.

And the donor economies that fund the system are being hit by the same global energy shock, though with far greater buffers. The ECB raised its inflation forecast while cutting growth projections. Defence spending rose 20% in real terms. The domestic political pressure is obvious. The forward risk the report flags as largest is remittances, where Gulf labour market contraction would compound household income losses just as food, fuel and transfer costs are peaking. The system's revenue base and its cost base are being squeezed by the same force, from both directions, simultaneously.

What this means

Read those four findings together and the structural problem is clear. The system responds to crises by mobilising resources from places that are not in crisis to places that are. When the logistics, the funding, the supply chains, the aviation, the insurance markets and the cost base are all affected by the same shock, that model becomes dramatically less reliable, more expensive and slower. Not because anyone decided to undermine it. Because the structural conditions that made it possible, an unaffected outside delivering into an affected inside, have weakened across multiple corridors at once.

The Iran war exposed a structural limit in a model designed for localised crises and poorly equipped for systemic shocks. That is the finding underneath the Mercy Corps report's five channels and six countries. And it has immediate operational consequences.

Transfer values need reviewing against post-war prices by mid-May, or at the next scheduled cash working group review, across all six case countries. In Sudan, a transfer sized to the April 2025 food basket has lost around 41% of its value from the civil war alone, before the Middle East war adds its second layer. In Somalia, the question is not just what the transfer is worth but whether the market will accept the instrument. Those are different problems. Cash working groups need to be running both conversations now.

Food security actors in Pakistan, Ethiopia, Somalia and Sudan need to be pre-positioning seed and fertiliser before restocking deadlines close. The global urea price is already locked into the importer cost. The pass-through to agrodealer retail will materialise in the next four to six weeks. Waiting for clarity on the diplomatic picture means missing the planting window. A missed planting window becomes a food-security crisis in October that emergency funding can only mitigate, not reverse.

The conditional tranche model in the report's recommendations, specific funding amounts committed now for release when observable triggers are met, is the right instrument for a situation where the timeline is uncertain but the direction is not. But finance will only matter if it can move faster than the shock. If release mechanisms are trapped inside ordinary donor review cycles, they will arrive after the operational window has closed. In this crisis, the calendar matters as much as the amount. This is where the pooled-fund argument becomes operational, not ideological. In a crisis where prices move in days and planting windows close in weeks, financing architecture is response architecture.

The harder question

If the Hormuz closure persists through Q3, and the report documents that five diplomatic reversals in thirteen days have not restored commercial shipping, the sector will need a different way of thinking about response. When I argued in "Seven Propositions" that other actors would fill the gaps left by the contracting system, I got pushback from senior colleagues who said the gaps would simply go unfilled. Looking at Sudan at 18.8% funded and Somalia at 14.3%, I think they may be right about the near term. The formal system is not being replaced. In many places it is just receding. And nothing is arriving at the same scale. I have argued before that you cannot shrink operational infrastructure below threshold and still expect it to surge. This crisis is testing that threshold in real time.

But that is not the whole picture. In contexts where the formal system is already failing, local actors and networks are carrying response on terms the international architecture does not always recognise, and often does not count. Sudan's mutual aid networks. Diaspora funding. Community-level adaptation that never appears in a situation report. The question is not only what new international model replaces the old one. It is also what the formal system can learn from the responses already happening without it.

The system never stress-tested the assumption it depended on most: that it would remain outside the crises it was responding to. Whatever comes next should start by mapping its own failure points before they are tested, not after. Which corridors are single points of failure? Which payment rails break when currency confidence collapses? Which supply chains depend on insurance markets behaving normally? Which surge mechanisms depend on aviation capacity that may not exist? Which donor pipelines are too slow for a shock that moves through prices in days and harvests in months?

Not only better logistics. A model that accounts for the system being inside the crisis, not outside it. One that can operate when costs are rising, supply chains are disrupted, funding is contracting, and all three are moving together. I do not know what that model looks like yet. But this report is the evidence base for why the question needs asking.

What I want to hear from you

1. Cash practitioners in the six case countries. Has your cash working group started the MEB recalculation the report recommends? If not, what is blocking it?
2. Anyone with visibility on agrodealer retail fertiliser prices in Pakistan, Ethiopia or Somalia. The report flags this as the critical data gap. If you have it, share it.
3. Logistics coordinators. What is the real cost increment on your corridors this month versus February?
4. Local responders and diaspora networks. What are you already doing that the formal system is not seeing, funding or counting?

Share what you are seeing. Tag colleagues who need to read this report.

One implication of the system being inside the crisis is that the analytical capacity needed to make sense of it cannot all sit inside the system either. Independent, practitioner-led analysis has a role to play: fast enough to be useful, disciplined enough to be trusted, and specific enough to inform operational decisions. If your team is working through these questions, I would be glad to compare notes: thomas@marketimpact.org

Read From Hormuz to the Frontlines of Hunger here: https://www.mercycorps.org/research-resources/hormuz-to-hunger

Follow the Mercy Corps Crisis Analysis Team on LinkedIn for updates.

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This is the sixth instalment in an ongoing series tracking the humanitarian implications of the 2026 Iran war and the broader funding collapse. Previous pieces: "The Strait Stays Closed" (March 2026), "The Jet Fuel Cliff" (April 2026), "Seven Propositions for the Next Eighteen Months" (April 2026). A forthcoming piece will examine cash and voucher assistance implications. The data dashboard is at data.marketimpact.org .

Thomas Byrnes is CEO of MarketImpact Digital Solutions, a humanitarian consulting firm specialising in digital systems, programme strategy, and responsible AI adoption.

This post is from Tom's Aid&Dev Dispatches.

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