Hormuz Conflict Chokes Fertiliser Flows as Oil Surges Above $100, Forcing Global Nutrient Price Spike

Armed conflict around the Strait of Hormuz has sharply disrupted energy and fertiliser flows from the Gulf, driving nitrogen prices higher, tightening availability into key consuming regions and raising production costs for the 2026/27 crop cycle. Traders report stranded cargoes, soaring freight and insurance costs, and aggressive spot buying from the US, Europe and Asia as supply chains reconfigure.

The Iran war has led to an effective closure of the Strait of Hormuz since late February, after joint US‑Israeli strikes on Iranian targets and retaliatory attacks on Gulf energy and port infrastructure. Around 20–25% of global seaborne oil and a significant share of LNG normally transit the choke point, alongside up to 30% of globally traded fertilisers, especially nitrogen products from Qatar, Saudi Arabia, Oman and other Gulf producers.

Introduction

In early March 2026, Iran’s Revolutionary Guard announced the closure of the Strait of Hormuz, anchoring over 150 tankers and commercial vessels along the route. Most shipping traffic through the waterway has since halted or diverted, as missile and drone strikes hit energy and export infrastructure across Iran and neighbouring Gulf states.

The resulting interruption in oil, gas and fertiliser flows has pushed Brent crude back above $100/bbl and triggered a broad energy shock. For agricultural markets, the most immediate transmission channel is through nitrogen fertilisers, where Gulf exporters are key low‑cost suppliers, and through higher fuel and freight costs feeding into farm margins and food prices.

🌍 Immediate Market Impact

With tanker traffic through Hormuz down by roughly three‑quarters and war‑risk premiums up around 50%, many fertiliser cargoes are delayed or unable to load. Industry estimates suggest that close to one‑third of global traded fertiliser and around half of internationally traded sulphur normally move via the Gulf, underscoring the vulnerability of nitrogen and phosphate supply chains.

Natural gas – the main feedstock for ammonia and urea – has risen alongside crude, lifting marginal production costs in Europe and Asia and prompting some producers to raise prices or consider rate cuts. Market participants report urea benchmarks up roughly 20–30% since the war began, with some regional quotes testing the highs last seen in 2022.

📦 Supply Chain Disruptions

The closure of Hormuz has trapped loaded and ballast vessels in the Gulf and forced others to await naval escorts or reroute, adding weeks to transit times. For fertilisers, this particularly affects exports of urea, ammonium sulphate, NPKs and sulphur from Qatar, Saudi Arabia, Oman, the UAE and Iran destined for South and Southeast Asia, East Africa, Europe and the Americas.

European buyers, already exposed to high gas prices, face tighter availability and higher offers from regional producers who are now able to lift prices in line with imported replacement values. In the US, delays or cancellations of Gulf urea cargoes ahead of spring application have driven a shift toward alternative nitrogen sources such as UAN solutions (AHL), putting additional pressure on global liquid nitrogen markets.

In Asia, major importers such as India, Pakistan, Thailand and the Philippines confront higher landed costs due to elevated freight, insurance and product prices. Some governments are signalling increased subsidy outlays or are tendering earlier and in larger volumes to secure supply ahead of the main planting seasons.

📊 Commodities Potentially Affected

• Urea and UAN (AHL) – Core nitrogen products most directly exposed to Gulf export disruptions; prices are rising sharply as importers in the US, Europe and Asia seek replacement volumes.
• Ammonia – Higher gas prices and disrupted Gulf production and shipping routes support ammonia benchmarks, tightening supply for downstream nitrate and phosphate producers.
• Phosphates (DAP/MAP) – Dependent on ammonia and sulphur; higher input and freight costs are lifting offers, especially into net‑importing regions such as Europe and South Asia.
• Potash – Less reliant on Gulf logistics but likely to see indirect support as buyers rebalance nutrient programmes and seek alternatives to expensive nitrogen and phosphate products.
• Cereals (wheat, maize) – Elevated fertiliser and fuel costs raise production expenses for 2026/27 crops, potentially trimming application rates and yields in price‑sensitive regions, with upside risk for grain prices despite currently stable physical wheat indications in key export hubs.
• Oilseeds and feed grains – Similar cost‑push pressures through fertiliser, diesel and freight; livestock feeders also face higher input costs via more expensive feed and energy.

🌎 Regional Trade Implications

Trade flows are already beginning to reorient. European and US buyers are increasing inquiries toward non‑Gulf nitrogen exporters such as Egypt, Algeria, Trinidad and Russia, though available spot volumes are limited and freight from these origins is also elevated.

Some Gulf producers are exploring overland routes via Saudi Arabia or Oman and exports through Red Sea or Arabian Sea ports where feasible, but these options are higher cost and constrained by infrastructure and security risks, including ongoing tensions in the Red Sea.

Import‑dependent markets in South and Southeast Asia, North Africa and parts of Latin America are most exposed to supply interruptions and price spikes. Conversely, exporters with surplus nitrogen capacity outside the Gulf – notably in North Africa, parts of North America and the former Soviet region – stand to benefit from improved margins and stronger demand, provided they can manage logistics and policy constraints.

🧭 Market Outlook

In the short term, fertiliser markets are likely to remain highly volatile, with risk premiums embedded in both product and freight. Price discovery is complicated by disrupted benchmarks, delayed tenders and selective producer offers, while farmers face tight delivery windows ahead of key application periods in the Northern Hemisphere.

A rapid de‑escalation in the Gulf could see a sharp correction from elevated nitrogen and phosphate prices as stranded cargoes are released and freight normalises. However, infrastructure damage to gas and oil facilities and the lingering risk of renewed closures suggest that even a partial reopening of Hormuz may not immediately restore pre‑war trade flows or price levels.

Traders will focus on the duration of the Strait of Hormuz disruption, government policy responses (export controls, subsidies, stock releases) and planting decisions in major grain and oilseed regions. Any evidence of reduced fertiliser application rates could translate into higher yield and price risk for the 2026/27 marketing year.

CMB Market Insight

The Hormuz crisis has crystallised fertiliser’s role as a strategic input tightly intertwined with energy and maritime security. For now, nitrogen markets are absorbing a simultaneous supply shock from the Gulf and a cost shock via higher gas and freight prices, with knock‑on effects across grains, oilseeds and livestock value chains.

Commercial players should reassess origin diversification, contract structures and freight exposure, and monitor daily changes in shipping risk assessments for the Gulf and alternative routes. While any ceasefire could trigger a rapid retracement in prices, structural vulnerabilities exposed by this conflict point to a persistently higher risk premium for fertiliser logistics linked to key maritime chokepoints such as the Strait of Hormuz.