Iran War and Strait of Hormuz Escalation Deepen Structural Risks for Energy, Fertiliser and Food Commodity Flows

Armed escalation around Iran and renewed threats over tanker movements in the Strait of Hormuz are prolonging the largest energy supply disruption in modern history, with mounting spillovers into fertiliser and food commodity markets. While some traffic has resumed, high war-risk costs and security warnings keep flows well below pre-war levels, tightening global input supplies and sustaining elevated price risk for the 2026–27 crop cycles.

The Iran war, triggered in late February 2026, saw Tehran move to close the Strait of Hormuz, a critical passage for Persian Gulf oil, LNG and bulk commodities. Despite a partial reopening and ongoing ceasefire diplomacy, Iran’s military has again warned oil tankers to follow its designated routes or face a “forceful response,” underscoring continued risk to vessels transiting the chokepoint. The disruptions arrive at a time when global fertiliser trade and food security remain highly sensitive to Gulf-origin supplies.

Immediate Market Impact

Tanker traffic through Hormuz has rebounded from the near-standstill seen in March but remains significantly below the roughly 20 million barrels per day of crude and products that moved before the war. War-risk insurance premiums and freight rates have surged, with recent assessments indicating war-risk cover alone can cost several million dollars per large-tanker transit, compared with a fraction of that pre-conflict.

These elevated transit costs are feeding directly into delivered prices for oil, LNG and fertiliser shipped from the Gulf, regardless of whether volumes ultimately move. At the same time, the effective removal of a substantial portion of Iranian and regional exports, combined with infrastructure damage and intermittent attacks, has tightened prompt availability. While strategic stock releases and demand-side adjustments have prevented extreme price spikes in energy benchmarks, volatility remains high and regional differentials have widened.

Supply Chain Disruptions

The closure and partial reopening of Hormuz have created a stop–start pattern in shipping, with convoys, rerouting via alternative pipelines, and backlogs at export terminals. Analysts note that traffic gains in late June were quickly reversed following new attacks on commercial vessels, highlighting the fragility of the corridor. Elevated war-risk surcharges, reduced insurance coverage and selective chartering are constraining capacity, particularly for tankers and bulk carriers serving Middle East–Asia and Middle East–Europe routes.

Fertiliser supply chains are particularly exposed. Roughly one-third of globally traded fertiliser, including about a third of urea and nearly a quarter of ammonia exports, originates in or transits through the Persian Gulf. S&P Global data show global seaborne dry bulk fertiliser shipments dropped 19% year on year in May, driven largely by lower loadings from the Gulf following the effective closure of Hormuz. Even with some resumption of sulfur and nitrogen shipments, fresh loadings from Gulf ports are expected to lag due to shipping constraints and competing demand from other regions.

Commodities Potentially Affected

• Crude oil and refined products: Reduced Hormuz throughput and higher freight and insurance costs support elevated outright prices and wider regional spreads, especially for Asian and European importers reliant on Gulf grades.
• Liquefied natural gas (LNG): The conflict has removed a sizeable share of global LNG supply, with scenarios pointing to sustained tightness if disruptions persist, raising gas prices and affecting power and industrial users worldwide.
• Nitrogen fertilisers (urea, ammonia, UAN): Gulf producers account for a major share of world exports; transit restrictions and higher freight are tightening supply, keeping urea prices in the region well above pre-conflict levels.
• Phosphates and potash-based blends: While less directly tied to Hormuz, elevated nitrogen prices and shipping disruptions in the Gulf are pulling up broader fertiliser benchmarks and complicating sourcing strategies.
• Grains and oilseeds: Higher fertiliser prices and uncertain availability risk curbing application rates in key exporting regions, potentially reducing yields and tightening supply for wheat, corn, rice and oilseeds from the 2026–27 harvest onward.

Regional Trade Implications

Asia remains the most exposed to Gulf energy and fertiliser disruptions, given its heavy reliance on Middle Eastern crude, LNG and nitrogen imports. Major buyers in South and Southeast Asia face higher CIF prices and may be forced to reallocate procurement toward Atlantic Basin suppliers, including the United States, West Africa and Latin America, where capacity allows.

For fertilisers, buyers in Latin America, sub-Saharan Africa and South Asia are competing more directly for volumes from North Africa, Russia (where permitted), and emerging producers outside the Gulf, such as in North America. Some Gulf states are exploring alternative export routes via the Gulf of Oman and overland links, but these options are limited in scale and do not fully offset Hormuz constraints. Countries with domestic gas and fertiliser capacity—such as the United States, Canada and some CIS exporters—could see expanded market share and stronger netbacks, but may also face internal price pressures.

Market Outlook

In the short term, commodity markets are likely to remain headline-driven, with any incident involving tankers or export infrastructure in or near Hormuz immediately reflected in flat prices, time spreads and freight. Traders are closely watching ceasefire negotiations, Iran’s enforcement of routing demands, and the durability of war-risk insurance coverage for commercial fleets.

For agricultural inputs, the key variables are the pace at which Gulf-origin fertiliser loadings recover and the extent to which high prices trigger demand destruction or delayed application. With seaborne fertiliser shipments already down sharply and alternative suppliers constrained, the risk of tighter nutrient availability for the next Northern Hemisphere planting season remains elevated, with potential knock-on effects on global grain and oilseed balances into 2027.

CMB Market Insight

The Iran war and ongoing Strait of Hormuz tensions underscore how a regional security crisis can cascade across energy, fertiliser and food commodity chains simultaneously. Even as some shipping resumes, structurally higher war-risk and freight costs, plus intermittent security incidents, imply that the "all clear" for Gulf-origin commodities is still distant.

For traders, importers and food industry buyers, this environment argues for a continued focus on diversification of supply, careful timing of purchases, and active management of freight and basis risk. The conflict has reinforced the strategic importance of fertiliser and LNG alongside crude oil in assessing geopolitical exposure—suggesting that risk premia linked to Middle Eastern transit routes may remain embedded in agricultural input and food markets well beyond the immediate end of hostilities.