Insight Focus
The Iran conflict has disrupted up to 38% of global fertiliser trade. This has driven price spikes and production shutdowns. Meanwhile, farmers face rising costs, reduced access to inputs and financial strain, and supply chain disruptions are increasing freight costs and delays. Broader impacts include rising food inflation, energy market shifts and tightening metals supply.
Hormuz Closure and Disruption
The Iran war and the subsequent closure of the Strait of Hormuz have unleashed a profound shock across global fertiliser markets, triggering ripple effects throughout the food supply chain. The conflict began with coordinated US–Israel strikes on Iran, prompting Tehran to impose tight control over the Strait of Hormuz—a maritime chokepoint through which nearly half of the world’s traded urea and significant volumes of LNG and ammonia typically pass.
This disruption has effectively halted the movement of critical agricultural inputs, plunging global fertiliser markets into what analysts describe as an unprecedented supply crisis. With shipping traffic cut off, 33–38% of global fertiliser trade has been disrupted, and roughly 22 million tonnes of annual Gulf urea exports have been unable to leave port.
As a result, nitrogen fertiliser prices have soared. Urea benchmark prices climbed 30–40%, with spot prices exceeding USD 680/tonne, while anhydrous ammonia surpassed USD 900/tonne. These price movements align with broader market reports showing US urea import prices rising 30% within a single week during the early stages of the conflict.
Production shutdowns have compounded the crisis. LNG disruptions and damaged energy infrastructure, especially at Iran’s South Pars field, a key hydrogen feedstock hub, have forced major fertiliser plants in Qatar, India and Bangladesh to curtail or suspend operations.
Similar strain has emerged in Europe, where soaring natural gas prices have undermined fertiliser output. These cascading failures form what experts call a “dual nitrogen trap”: fertiliser cannot be produced, nor can existing inventory be shipped.
Conflict Shifts On-Farm
The consequences for agriculture are immediate and severe. In the US, fertiliser availability is already about 25% below seasonal expectations, forcing farmers to pay nearly double January prices for nitrogen inputs. This occurs at a time when farm debt is projected to reach a record USD 624.7 billion in 2026, intensifying financial strain.
Source: USDA
Escalating costs threaten farm liquidity and increase credit risks for lenders, equipment manufacturers and insurers. Retailers and farm suppliers expect delayed or reduced purchasing as producers trim budgets or shift planting strategies toward less fertiliser‑intensive crops.
Globally, yield risks are rising. Analysts warn that spring planting disruptions in the Northern Hemisphere may reduce application rates of nitrogen fertilisers, diminishing yields for staple crops such as wheat, corn, soybeans and rice.
Source: USDA
Global Food Security in the Spotlight
The conflict has also impacted food manufacturers and farmers, who now confront higher ingredient costs, delayed freight and margin pressures.
With nitrogen fertilisers underpinning nearly half of global crop yields, the dual production‑and‑transport crisis emanating from the Gulf poses a long‑term threat to food security, potentially surpassing earlier shocks experienced during the COVID‑19 pandemic and the Russia‑Ukraine conflict.
Already this month, farmers in Estonia are set to hold a nationwide protest against uncompetitive conditions for Estonian producers within the EU. In the past few years, there have been farmer protests as far afield as the Netherlands, Bosnia, El Salvador and New Zealand in protest of difficult conditions.
While farmers face rising costs, consumers have been hit by increasing food inflation, which remains elevated across many income groups. Developing, import‑dependent countries—especially in Asia, Africa, and the Middle East—face heightened risk of food shortages.
Freight Rates, Congestion Rise
Amid the chaos in the Strait of Hormuz, container rates have strengthened – although not as much as they jumped during the pandemic or Red Sea crises. Congestion has been slowly building at key Asian ports though, and disruption is likely to be prolonged, meaning rates still have time to go up.
The main concern is the blockage of two key passages – the Red Sea/Suez and the Strait of Hormuz, essentially throttling Asia-Europe trade. Rerouted shipping around Africa’s Cape of Good Hope adds weeks to delivery times and millions in additional fuel per voyage, further elevating commodity prices. Shippers have already added Emergency Fuel Surcharges in an effort to absorb costs.
Congestion at ports Nhava Sheva, Khor Fakkan, Karachi and Mundra climbed in the weeks after the initial bombing but have since slightly normalised. Still, liners are under pressure as they scramble to assemble new transshipment hubs and reposition the necessary containers.
Source: Drewry
In Other News…
Good News for Ethanol?: As crude prices soar, countries are already scrambling to shore up fuel supplies – and one way they are doing so is by relying on ethanol. There is speculation over whether Brazilian mills could potentially prioritise the production of ethanol due to the rising cost of gasoline. The Thai government is also reportedly prioritising E20 in an effort to stabilise fuel prices. And in India, the energy crisis is set to increase the adoption of EVs, incentivise flex-fuel vehicles and increase blending levels. The country already plans to gradually increase its blend limit from E22 to E27.
Interruption in the Metals Market: A report by Wood Mackenzie projected a 200,000-tonne global aluminium deficit in 2026 prior to the Gulf conflict – and the situation is only likely to get worse if the war is prolonged. Given that the Middle East is a critical aluminium producer, the deficit could widen to 800,000 tonnes by 2028, says Wood Mackenzie.
EU Cinches Trade Deals: The EU is set to finalise trade deals with both Australia and Mercosur in the coming months, setting the stage for easier trade. The EU-Mercosur deal has been in the works for 20 years but, according to reports, may come into force as early as May. Meanwhile, talks on the EU-Australia deal are set to be concluded during a visit by Ursula von der Leyen to Canberra in late March.
