NEWSOURCE21

Forget Oil Fertilizer Shocks Are The Real Hormuz Story

The Strait of Hormuz Crisis has Exposed Another Global Dependency, One We Might only See in the Next Harvest

The Geopolitical Pickle

Today, we are looking at a different resource that is vital to both the world economy and global food security, while remaining highly vulnerable to the ongoing conflict in the Middle East.

Smallholders like Baldev Singh make up the bulk of India’s farmers. He works a small plot in Punjab state, and like most farmers, he operates on margins thin enough that a single bad harvest can mean ruin. When asked in late March about the war raging thousands of miles away in Iran, his answer was blunt. “Right now, we are waiting and hoping,” he added, that farmers like him may not survive unless the Indian Government can keep urea affordable through subsidies.

He was not talking about geopolitics. He was talking about access to urea.

When the US and Israel launched their war against Iran in late February, effectively closing the Strait of Hormuz, the world was understandably fixated on oil. Crude prices spiked, strategic reserves were released, and the spectre of a 1970s-style energy shock dominated the headlines. We covered this in our earlier Crude Realities article. But parallel to the oil crisis, a quieter disruption was unfolding across global fertilizer supply chains.

Fertiliser is not as glamorous as oil. It trades on futures markets too, but rarely has the same round-the-clock attention. Modern agriculture, however, depends heavily on farmers obtaining the right nutrients at the right point of the growing cycle. A lack of fertiliser means lower yields. The effects then travel upstream to food prices, with the poorest producers and consumers least able to absorb the shock.

The chokepoint, again

The numbers reveal the scale of the exposure. Gulf countries accounted for around 36% of global urea exports between 2023 and 2025, alongside 29% of ammonia exports and 26% of diammonium phosphate (DAP) exports. The region also supplies close to half of the world’s traded sulphur, a critical input for phosphate production. Iran and Qatar are the Gulf’s largest urea exporters, followed by Saudi Arabia. Much, although not all, of this trade depends on passage through Hormuz.

By the end of June, an estimated 3.9 million tonnes of Gulf fertiliser exports had been suspended, equivalent to roughly 30% of the region’s annual fertiliser trade. A brief June truce allowed some backlogged cargoes to escape, but it did not restore normal trade. On 11 August, only six vessels passed through Hormuz, compared with 130 to 140 a day before the war.

Unlike the oil market, there is no internationally coordinated fertilizer reserve managed by an institution such as the International Energy Agency. Individual countries and companies hold stocks, but there is no emergency mechanism capable of releasing urea or ammonia into the global market. Governments can redirect imports, raise subsidies and encourage substitution, but these measures shift the cost rather than making the disruption disappear.

This is the central difference between an oil shock and a fertilizfertiliserer shock. Governments can release petroleum reserves and buy time for energy markets to adjust. Fertiliser has to reach particular fields within particular windows. When it does not, the shock appears in delayed purchases, reduced application rates and, eventually, lower yields.

The Clock is Ticking

Fertiliser is not a commodity that farmers can delay purchasing indefinitely. Most nutrients are applied before or around planting, with some nitrogen added during crop growth. Miss the relevant window, and additional fertiliser later cannot fully compensate.

The Hormuz closure arrived as the Northern Hemisphere’s spring planting season was beginning. In India, farmers were preparing for the monsoon-dependent kharif cycle, which produces much of the country’s rice and grains. In parts of East Africa, the main planting season was already underway. Those deadlines have now passed. Attention is shifting to Southern Hemisphere planting later in 2026 and then to Northern Hemisphere farmers purchasing inputs for 2027.

The initial price response was dramatic, but it did not last uniformly across the market. World urea prices rose from around US$400 a tonne before the war to more than US$850 in April. They then fell to US$453 in June and approximately US$393 on 12 August, slightly below their level a year earlier. China relaxed export restrictions, delayed cargoes reached buyers, and seasonal demand weakened. Farmers also postponed purchases or switched products, decisions that may have long-term consequences.

Phosphates tell a different story. DAP rose from roughly US$580 before the war to US$770 and was still trading at about US$795 in mid-August. Sulphur shortages and export restrictions continued to squeeze phosphate producers even as urea prices retreated. Potash, whose largest suppliers lie outside the Gulf, was much less directly affected. There is therefore no single “fertiliser price”, the nitrogen shock has eased, while the phosphate squeeze remains.

Dante’s Agricultural Inferno

The effects have radiated outwards according to countries’ dependence on Gulf supplies, their position in the agricultural calendar and, crucially, their capacity to pay.

India, Bangladesh and Pakistan all cut domestic fertiliser production after losing Qatari liquefied natural gas and other feedstocks. India remained exposed. Before the war, the Gulf supplied around 20–30% of its urea imports and 30% of its DAP imports. New Delhi entered the crisis with 18 million tonnes of fertiliser stocks, compared with 14.7 million tonnes a year earlier, then expanded subsidies and turned to Russia, Morocco and other suppliers. A record April tender secured 2.5 million tonnes of urea, but at almost twice the price India had paid two months earlier. The government protected farmers by transferring much of the shock to the public balance sheet.

Brazil shows how the initial price surge became a longer-term affordability problem. It is one of the world’s agricultural giants, producing roughly 76% of global orange juice, 42% of soybeans and 35% of coffee. In 2025 it imported all of its urea, with an estimated 41% of those imports passing through Hormuz.

Prices for urea delivered to Brazil jumped around 35% in the first two weeks of the conflict. By 13 August, however, the front-month Brazil contract was around US$438 a tonne, approximately 20% below the US$540–545 spot assessment recorded on 3 March. The price spike has largely unwound, but the decisions it forced remain. Brazilian soybean farmers had purchased only around half of their 2026/27 fertiliser needs by late May, compared with more than 60% in a typical year.

In July, Yara Brazil estimated that total fertiliser consumption could fall by 12% this year, from 49 million tonnes to around 43 million, potentially the market’s first contraction since 2001. Phosphate fertiliser has been hit particularly hard. Monoammonium phosphate (MAP) reached around US$900 a tonne in May and June, while an estimated 2–2.5 million tonnes of phosphate demand could disappear. For one of the world’s most important agricultural exporters, the question is no longer whether prices spiked. It is what happens to yields after farmers delay purchases, substitute products or use less.

Brazil at least has the fiscal capacity and commercial infrastructure to absorb part of the shock. Across Sub-Saharan Africa, the room for manoeuvre is far smaller. The region imports most of its fertiliser, while average application rates are already only about 22 kilograms per hectare, a fraction of the global norm. Ethiopia illustrates the exposure. It imports almost all of its chemical fertiliser, much of it from Gulf suppliers, and relies on the port of Djibouti as its principal import corridor. Agriculture accounts for about 35% of GDP and employs more than 70% of the population. Farmers operate on very small margins, leaving them little room to absorb higher costs or delayed deliveries.

The human effects are already visible, although they should not be confused with a single global estimate. In March, the World Food Programme projected that 45 million additional people could face acute hunger if the war continued beyond June and oil remained around US$100 a barrel. That was a conditional scenario, not an observed count. By June, WFP analysis found that an additional 2.5 million people in Somalia, 2.3 million in Afghanistan and 1.3 million in Sri Lanka were already struggling to meet basic food needs because of the wider Middle East shock.

The Price of the Backup

Russia’s invasion of Ukraine in 2022 disrupted fertiliser markets, but this was just a taste of things to come, causing some countries to adapt by increasing imports from the Middle East. That option is now gone. The Gulf was the main backup plan. Now there needs to be a new backup plan, with dwindling options.

Some diversification is happening. Governments have sought additional shipments from Russia, Morocco, Belarus, and elsewhere. West African importers like Nigeria and Ghana have begun pre-purchasing Russian fertiliser for the third quarter of 2026. Russia is the world’s leading nitrogen fertiliser exporter, and its Baltic routes bypass Hormuz. Analysis estimated that Russian companies earned an additional £500 million from urea exports between March and May, more than £5 million a day. The same pattern from the energy markets is repeating in fertiliser, where a Western-led military operation inadvertently strengthens Moscow’s hand as an indispensable commodity supplier.

But substitution has limits. Gulf urea is cheaper to ship to Mumbai than Russian or Chinese urea, and India’s procurement agencies have long-term supply agreements with Gulf producers such as QAFCO (Qatar Fertiliser Company) and SABIC (Saudi Basic Industries Corporation) that cannot be replaced overnight. New production capacity, meanwhile, requires years of investment and access to cheap natural gas or mineral deposits. The IFA’s November 2025 outlook projected a 4% increase in global nitrogen capacity for 2026, nowhere near enough to offset the current shortfall.

And then there is the problem of restarting. Shutting down a fertiliser plant is not a simple pause. Restarting after a shutdown typically takes five to eight weeks under normal conditions. With structural damage from strikes and ongoing hostilities, the timeline stretches into years. Every week the Gulf’s plants remain offline, the global deficit deepens, and the more they are damaged, the longer it will take.

A shadow far and wide

The full consequences of the fertiliser shortage will not be visible for months, if not years, to come. Crops that were under-fertilised this spring will produce lower yields at harvest. Higher input costs that farmers are absorbing now will be passed on to food prices next year. The WFP’s Carl Skau summarised the range of outcomes: in the worst case, lower yields and crop failures next season; in the best case, higher input costs passed through into food prices next year. That means the best-case scenario is food inflation. The worst case is crop failure.

The CSIS has modelled sustained disruption scenarios and concluded that the effects could ripple across the Southern Hemisphere’s planting season in late 2026 and into the Northern Hemisphere’s 2027 spring planting. This is not a crisis that ends when the fighting stops, and the fighting hasn’t even stopped.

This crisis has triggered discussions about the over-centralisation of fertilisers and their critical status worldwide. “Green” ammonia, produced through electrolysis powered by renewable energy rather than natural gas, could theoretically enable nitrogen production in countries that currently lack it. Australia, Chile, and parts of the United States are already exploring this path. But green ammonia remains expensive, limited in scale, and years away from meaningfully denting the market. For now, the world’s food system runs on natural gas piped through the Gulf, and there is no shortcut around that dependency.

The slow-burning crisis

Oil shocks make front pages because they are felt immediately at the pump. Fertiliser shocks are slower, quieter, and ultimately more dangerous. A barrel of oil not delivered today raises the price of gasoline tomorrow. A tonne of urea not delivered in March lowers the September harvest, raises bread prices in January, and pushes a farmer in the Global South closer to the edge of failure. This is a cascading crisis; when there is no food, people move, which could trigger a migration crisis of people fleeing starvation.

The Strait of Hormuz is the jugular of the global energy system. We explored that in our earlier series, Crude Realities. What the current crisis has revealed is that the same 21-mile bottleneck is also a critical artery of the global food system. The world built both of its key industries on the same chokepoint, and is now dealing with the consequences.

Baldev Singh, the farmer in Punjab, will find out in a few months whether his harvest was enough. Millions of farmers like him, from Brazil to Bangladesh to Ethiopia, are in the same position. They are hoping for a ceasefire to a conflict they have no power to influence, over a waterway most of them will never see. While for some this crisis means paying more for their coffee in London, Prague, New York, or Madrid, for many others it could mean a collapsing way of life.