Insight Focus
US–Iran 14-point deal signals fragile de-escalation. Hormuz traffic is recovering, but congestion and vessel shortages are keeping tanker rates elevated and flows below normal. Fertiliser markets are diverging, with nitrogen prices falling while phosphates stay tight, while early disruptions highlight rising weather risks as El Niño develops.
US–Iran Deal Brings Hope and Uncertainty
The biggest story in June was undoubtedly the US and Iran reaching a 14-point memorandum of understanding on June 17, signalling a potential de-escalation in one of the most critical geopolitical flashpoints for global energy and trade.
Details of the agreement, released by US officials, show that both sides have committed to further negotiations over the next 60 days to reach a more comprehensive settlement. The MOU includes provisions around mutual sovereignty, a ceasefire and the reopening of the Strait of Hormuz, alongside the potential lifting of US sanctions on Iran – developments with direct implications across agricultural supply chains.
However, uncertainties remain. While the US has introduced a temporary 60-day waiver on Iranian oil sanctions, there is no clarity on the scale or durability of broader sanctions relief, and both sides continue to disagree over key provisions, including the release and use of frozen Iranian assets. There is also no confirmed agreement on nuclear inspections or the handling of Iran’s enriched uranium stockpile, with both sides offering conflicting interpretations of what has been agreed.
Overall, the deal appears fragile and a return to hostilities cannot be ruled out. Israel has continued military operations in Lebanon, with Iran accusing it of breaching the MOU 84 times within the first two days of the agreement. As a result, the agreement remains a preliminary framework rather than a settled outcome, leaving considerable uncertainty over its implementation and longer-term impact on global supply chains—and whether this marks the beginning of a lasting de-escalation or merely another pause.
Hormuz Traffic Picks Up, Bottlenecks Persist
Traffic through the Strait of Hormuz has started to pick up following the June 17 US–Iran agreement, but remains well below pre-conflict levels.
At least 172 vessels crossed the strait in the days after the deal, including 42 in a single day, versus a pre-war average of around 125–138 daily transits. A significant backlog persists, with more than 200 tankers still waiting inside the strait and around 100 vessels stuck in the Gulf with cargo onboard, limiting the availability of ships for new exports.
This tightening in available tonnage has driven a sharp surge in tanker rates. Daily hire costs for vessels operating around the Gulf have nearly doubled, rising to around USD 190,500 per day from roughly USD 106,500 a week earlier. For Very Large Crude Carriers (VLCCs) moving cargoes through Hormuz, earnings have climbed to nearly USD 470,000 per day, reflecting both constrained vessel supply and a growing queue of cargoes awaiting shipment.
Despite the reopening, operational and governance uncertainties continue to slow the normalisation of flows. Iran has introduced a permit requirement for transiting vessels, while ongoing discussions with Oman over the future administration of navigation and maritime services—including potential transit costs—highlight that the framework for passage through the strait remains unsettled. Combined with mine risks and changing routing guidance, this continues to constrain traffic, keeping tanker markets tight even as global oil prices have fallen.
Fertiliser Prices Diverge
Nitrogen fertiliser prices have dropped sharply as markets price in an eventual recovery in Middle East supply, despite ongoing disruption to flows through the Strait of Hormuz. Benchmark Middle East urea prices have fallen around 50% from USD 918/tonne in April to roughly USD 475/tonne, with US prices also down about 53% from spring highs. The decline began before shipping normalised, driven by weak demand and the resumption of Chinese exports from June 1.
The price fall reflects demand destruction during the spike. High fertiliser costs, combined with lower crop prices, pushed farmers to reduce application rates or switch to less fertiliser-intensive crops, with global nitrogen use estimated to have fallen by around 5%. Many Northern Hemisphere farmers had already bought at peak prices, limiting further demand, and affordability remains stretched at roughly 83.5 bushels of corn per tonne of urea.
At the same time, physical supply remains constrained, with weekly exports through Hormuz still down around 90% (from ~600,000 tonnes to ~60,000 tonnes), more than 40 fertiliser vessels stuck in the region, and around 900,000 tonnes of urea held in floating storage.
In contrast, phosphate fertiliser prices remain elevated due to a shortage of sulphur, a key input. Around 50% of global sulphur trade typically passes through the Strait of Hormuz, and prices have more than doubled during the conflict. As a result, while nitrogen prices have corrected sharply, broader fertiliser markets remain tight, with supply chain disruption likely to take months to fully unwind.
Source: Investing.com
Weather Risks Rise as El Niño Develops
El Niño conditions are now in place and are expected to persist through March 2027, with forecasts pointing to a strengthening event later this year and rising risks of a more severe “super El Niño.”
Such an outcome would increase the likelihood of extreme weather globally, amplifying climate volatility and raising risks for agricultural production and food security.
However, even before El Niño fully develops, weather is already having a noticeable impact across key agricultural regions in June 2026, highlighting how sensitive global production remains to short-term climate shocks.
In Europe, a record-breaking heatwave across France, Spain and the UK pushed temperatures above 40°C following a very dry spring, placing crops under stress. French crop ratings declined, with soft wheat at 76% good/excellent and spring barley falling sharply from 83% to 68%. However, the heatwave has since broken, with cooler temperatures and rainfall helping stabilise conditions, and markets now expect that overall yield losses may remain limited. Hot weather is forecast to persist across parts of Europe, keeping weather risks in focus.
In Brazil, weather conditions have been mixed but overall supportive. The Safrinha corn harvest is underway, with strong yields reported—particularly in Mato Grosso—although harvesting has been slowed by wetter-than-normal conditions in some areas. More broadly, above-average temperatures and uneven rainfall are creating some risk for late-planted corn in central regions, but overall production prospects remain strong, reinforcing a large South American crop.
In India, the monsoon has stalled during a critical planting window, leaving rainfall around 40–60% below normal across key agricultural states such as Maharashtra, Gujarat and Madhya Pradesh. Dry conditions are delaying the sowing of crops including rice, soybeans and pulses, raising risks to planting progress and early crop development, although rainfall is expected to improve later in June.
In China, excessive rainfall is creating the opposite challenge, disrupting harvesting and increasing flood risks. Summer wheat harvesting—accounting for over 20% of annual output—is underway but has been slowed by persistent rain across key provinces such as Henan and Shandong. With rainfall running above average and over 140 rivers exceeding warning levels, further disruption to crop quality and logistics remains a key risk.
US Trade Policy Creates Uncertainty
US trade policy continues to drive uncertainty across agricultural markets, with a growing number of tariff proposals and investigations signalling a more structural shift.
Planned measures include 10–12.5% tariffs on imports from around 60 countries linked to forced labour concerns, alongside a potential 25% tariff on certain Brazilian goods under a Section 301 investigation. At the same time, the administration is working to establish a US–China Board of Trade, which would create a formal channel to review existing tariffs and negotiate potential adjustments.
This more aggressive US stance is already shaping responses from key trading partners. The EU has moved to cut tariffs on US industrial goods to meet the July 2025 Turnberry agreement and avoid higher US tariffs ahead of the 4 July deadline, effectively acting to prevent escalation. However, tensions remain, with the US still threatening additional measures, including potential 100% tariffs on French wine, highlighting how fragile the agreement is.
For agricultural markets, recent trade disputes show how quickly tariffs can reshape flows. During the previous US–China trade conflict, Chinese retaliatory tariffs reduced US agricultural exports to China by an estimated USD 14.9 billion in one year, including a USD 6.8 billion drop in soybean exports. These lost volumes were largely replaced by Brazilian supplies, demonstrating how buyers shift origins rapidly, and how difficult it is for exporters to regain market share once trade patterns change.
