Middle East War and Hormuz Blockade Expose Global Potato Chain to Fertilizer and Energy Shock

The escalating war involving Iran, Israel, the US and regional allies, and the de facto closure of the Strait of Hormuz, are rapidly turning into a critical cost shock for input-intensive crops such as potatoes. Fertilizer, fuel and freight costs are rising in tandem, with Indian buyers among the most exposed to disrupted Gulf-based supplies. While potato product prices, such as European potato starch, have been broadly stable so far, risk premia are building along the chain.

For agricultural markets, the core issue is not direct damage to potato fields but the disruption of energy and fertilizer flows from the Persian Gulf. Iran’s closure and harassment of tanker traffic through the Strait of Hormuz – a corridor that normally handles around 20% of global oil and LNG shipments and a large share of nitrogen and sulfur-based fertilizers – has led to near‑halted tanker movements and rerouting of cargoes around Africa.

Introduction

Since late February 2026, the Iran war has progressively intensified, with missile and drone attacks against energy infrastructure across the Gulf and repeated strikes on commercial shipping. Recent attacks on LNG and refinery facilities in Qatar, Kuwait and the UAE, as well as strikes on ports in Oman, have compounded the risk to maritime traffic in and around Hormuz.

The effective closure of the Strait has removed a critical artery for both energy and fertilizer trade. UNCTAD estimates that roughly one third of global seaborne fertilizer trade, including major volumes of urea, ammonia, phosphates and sulfur, transits Hormuz. For India – a top importer of LNG and fertilizers from the Gulf – this chokepoint crisis is feeding into higher farm input costs just as growers prepare cropping plans for 2026/27, including for potatoes.

🌍 Immediate Market Impact

The first-order impact has come through energy markets. Oil and LNG prices have jumped on fears of prolonged supply disruption, as around one fifth of seaborne oil and a similar share of LNG is stranded or rerouted. Higher fuel costs are feeding directly into field operations, cold storage, and transport expenses in potato supply chains, particularly in energy‑intensive markets like India where irrigation and refrigerated storage are widely used.

In parallel, fertilizer benchmarks are rising sharply. Market data compiled by S&P Global and other sources show ammonia prices in the Middle East up by around USD 30/mt in a single week, with urea, phosphates and sulfur all moving higher as ships are stranded in or diverted away from Hormuz. For potato growers, who depend on high and precisely timed applications of nitrogen, phosphorus and potassium, input cost inflation is already tightening margins and could prompt adjustments in nutrient application or area.

📦 Supply Chain Disruptions

The logistical shock is concentrated in the Gulf but felt globally. Analysts estimate that around 25–50% of international trade in urea, sulfur, ammonia and some phosphate fertilizers relies on Gulf export terminals and transit through Hormuz. Several large Gulf producers, including Qatar, have temporarily halted or reduced output of LNG-linked fertilizer products after drone and missile attacks, removing key tonnage from the market.

Shipping lines are diverting vessels around the Cape of Good Hope, extending voyages by 10–15 days and adding freight costs for bulk cargoes destined for Asia, including India. For Indian importers, this means higher CIF prices and tighter delivery windows for fertilizers ahead of planting and top‑dressing phases. Storage and processing operators in the potato chain also face higher power tariffs as LNG-linked gas supplies tighten and domestic fuel substitution raises overall energy costs.

📊 Commodities Potentially Affected

• Fertilizer (urea, ammonia, phosphates, sulfur) – A third of global seaborne fertilizer trade and up to half of sulfur exports pass through Hormuz; disruptions are lifting prices and tightening availability, especially for Asian buyers.
• Natural gas and LNG – Gulf LNG flows are constrained by attacks and shipping risks, raising global gas prices and the cost base for nitrogen fertilizer production and on‑farm energy use.
• Crude oil and refined fuels – Roughly 20% of global oil exports are affected, increasing diesel and gasoline prices that underpin cultivation, transport and processing costs in the potato chain.
• Potatoes (table, processing, seed) – No direct supply loss from the conflict, but higher input costs, potential fertilizer rationing and costlier storage threaten yields and may curb planting, especially in cost‑sensitive regions.
• Potato derivatives (starch, flakes, frozen products) – Processing margins are squeezed by higher energy and freight costs; export offers from Europe and other origins may need to reflect increased logistics and storage expenses, though recent Polish potato starch quotes remain flat at around EUR 0.82/kg FCA Lodz.

🌎 Regional Trade Implications

Asia is the focal point of the trade shock. In 2024, more than 80% of LNG transiting Hormuz headed to Asian markets, with India, China and South Korea major buyers. India also imports a large share of its DAP and other fertilizers from Middle East suppliers whose export logistics are now severely constrained.

Importers in India may increasingly diversify fertilizer sourcing towards alternative suppliers in North Africa, Russia, and East Asia, though these origins come with higher freight costs and limited spare capacity. Some Gulf producers are exploring rerouting via Red Sea ports or overland links, but available volumes are insufficient to fully offset lost Hormuz capacity and are subject to existing Red Sea security risks.

On the energy side, higher international LNG prices could push Indian utilities and industry to lean more on coal or domestic gas, but this merely shifts rather than removes the cost pressure, keeping electricity and transport rates elevated. For potato processors and cold‑store operators, this environment increases the incentive to optimize storage durations and throughput, potentially affecting the seasonal availability profile of potatoes and processed products on both domestic and export markets.

🧭 Market Outlook

In the near term, markets are likely to remain driven by headlines from the Gulf and any sign of reopening or securing the Hormuz corridor. Fertilizer benchmarks are already volatile; further attacks on energy or export infrastructure, or explicit export controls by key producers, would likely trigger another leg higher in nitrogen and sulfur prices.

For potato sector participants in India and other Asian markets, the main operational risks are delayed input deliveries, higher working capital needs, and the possibility of adjusting fertilizer regimes if prices spike further. Decisions on 2026/27 potato plantings, storage strategies and contract pricing for processed products will increasingly factor in elevated and uncertain input costs, even if farmgate potato prices themselves have not yet fully adjusted.

CMB Market Insight

The current Middle East conflict has transformed the Strait of Hormuz from an energy chokepoint into a systemic risk hub for global input‑dependent agriculture. For the potato industry, which sits at the intersection of high fertilizer demand and energy‑intensive storage and processing, this is a structural vulnerability rather than a short‑lived disturbance.

Commodity buyers, processors and traders linked to the Indian market should prepare for an extended period of elevated fertilizer and fuel prices, longer lead times and localized tightness in input availability. Strategic responses will likely include diversifying fertilizer origins, revisiting nutrient application strategies, repricing forward contracts to reflect higher logistics and storage costs, and, where feasible, investing in energy‑efficient technologies across the potato value chain.