Strait of Hormuz Conflict Deepens Global Fertilizer Squeeze and Logistics Risk

Strait of Hormuz Conflict Deepens Global Fertilizer Squeeze and Logistics Risk

Escalating military confrontation between the United States and Iran around the Strait of Hormuz has sharply reduced tanker traffic and compounded an already severe fertilizer supply shock. Nitrogen markets in particular face tighter availability, elevated prices and mounting logistics risk as Gulf-based production and export routes remain constrained.

While some European producers have ramped up output using alternative gas supplies, these volumes are insufficient to offset lost or delayed shipments from the Middle East, leaving buyers in Europe, North Africa and parts of Asia exposed to higher costs and delivery uncertainty into the 2026/27 season.

Introduction

The Strait of Hormuz, a critical chokepoint for global energy and fertilizer trade, has been heavily disrupted since Iran imposed sweeping restrictions on vessel movements following the outbreak of war with the United States earlier this year. Recent days have seen renewed airstrikes and missile exchanges, including U.S. interceptions of Iranian drones and missiles aimed at Gulf allies and the strait itself, keeping maritime risk at elevated levels.

Shipping analytics indicate that overall tanker transits through Hormuz remain 90–95% below pre‑war levels, with a growing share of traffic operating “dark” without AIS signals. This has not only constrained oil and LNG exports but also disrupted outbound flows of nitrogen and phosphate fertilizers from producers across Iran, Qatar, Saudi Arabia and the UAE, turning the corridor into a critical failure point for global agricultural input supply.

Immediate Market Impact

The closure and militarization of Hormuz have sharply reduced monthly fertilizer exports from the Gulf, particularly urea and ammonia-based products that normally move by handymax and panamax vessels to Asia, Europe and Latin America. A recent analysis estimates millions of tonnes of fertilizer shipments per month are being delayed or rerouted, contributing to an “unprecedented shock” to nitrogen availability.

Spot prices for seaborne urea had already risen earlier in the conflict and remain under sustained upward pressure as buyers compete for limited cargoes from alternative origins. At the same time, elevated energy prices caused by constrained oil and gas exports from the Gulf raise production costs for nitrogen plants elsewhere, limiting the scope for a compensating supply response in Europe and the Americas.

Supply Chain Disruptions

Port congestion and anchorage backlogs have built up on both sides of the Strait, with hundreds of vessels either waiting or rerouting via longer, more expensive passages. Commercial traffic that does move increasingly does so with transponders off, complicating logistics planning for fertilizer producers and traders.

Major nitrogen complexes in Iran have gone offline or are operating at reduced rates following strikes on power and gas infrastructure, removing significant urea and ammonia export capacity from the market. Additional risk premiums on war insurance, potential new U.S. sanctions and the naval blockade targeting vessels linked to Iran further impede flows of both hydrocarbons and fertilizer intermediates through the region.

Regions heavily reliant on Gulf-origin nitrogen and phosphates—North and East Africa, parts of South Asia, and southern Europe—face delays, partial order fillings and rising freight costs. Merchants in Europe are reportedly booking only confirmed farm demand and avoiding speculative stocks, resulting in thin pipeline inventories and heightened sensitivity to any further disruption.

Commodities Potentially Affected

• Urea (granular and prilled) – Directly hit by curtailed exports from Iran and neighboring Gulf producers, leading to higher FOB values and tight nearby availability in Europe, Africa and Asia.
• Ammonia and UAN/AHL solutions – Production in the Middle East relies on natural gas feedstock and export routes via Hormuz; plant outages and shipping risks constrain volumes, particularly affecting liquid nitrogen markets.
• Ammonium nitrate (AN) and CAN/KAS – Substitution away from urea in some European markets toward nitrate-based fertilizers increases demand for CAN/KAS, tightening regional balances and supporting prices. (Inference based on reported switching patterns.)
• Phosphate fertilizers (DAP/MAP) – Reduced availability of ammonia and sulfur, plus higher freight, push up production costs and delivered prices for DAP/MAP from Gulf-linked producers.
• Sulfur and sulfuric acid – Disruptions to regional oil and gas processing, combined with recent Chinese export restrictions on sulfuric acid and some phosphate products, add further tightness to phosphate supply chains.

Regional Trade Implications

Importers in Europe are increasingly turning to domestic and Norwegian gas‑based nitrogen production to offset reduced Gulf supplies, but these plants face higher feedstock costs and limited spare capacity, capping their ability to stabilize prices. North African exporters (e.g., Morocco, Egypt) may benefit from stronger demand and improved netbacks for DAP and nitrogen shipments into Europe and West Africa.

Asia’s major fertilizer consumers, including India and Pakistan, must compete more aggressively for cargoes from Russia, North Africa and any Middle Eastern producers able to bypass Hormuz via alternative pipelines or “dark” shipping corridors, raising both cost and counterparty risk. Latin American markets, especially Brazil, confront longer lead times and greater price volatility as typical Gulf-origin urea and phosphate flows are replaced by more distant or fragmented supply sources.

Countries already facing high food-import bills and fertilizer import dependence risk secondary impacts on crop yields if farmers cut application rates in response to higher prices and uncertain availability, reinforcing food security concerns flagged by international agencies.

Market Outlook

In the short term, nitrogen and phosphate markets are likely to remain tight and volatile, with risk skewed to further price spikes should hostilities intensify or additional infrastructure be damaged. Traders will closely monitor any signals of progress in U.S.–Iran talks, as even a partial de‑escalation that allows safer tanker passage could quickly release stranded cargoes and temporarily ease nearby tightness.

However, structural damage to plants and the time required to repair logistics chains mean that even in a de‑escalation scenario, normalized flows of fertilizer and intermediates from the Gulf are unlikely to return before late 2026. Until then, regional producers outside the Middle East, particularly in Europe, North Africa and the Americas, will continue to play an outsized role in balancing global markets, with cost structures anchored to elevated energy and freight prices.

CMB Market Insight

The ongoing Strait of Hormuz crisis has transformed a regional military conflict into a systemic risk for global fertilizer supply, amplifying both price and logistics volatility across nitrogen and phosphate markets. For importers and distributors, risk management now requires greater geographic diversification of supply, earlier procurement for key seasons and careful assessment of counterparty and transit exposures.

Producers outside the Gulf stand to capture improved margins but must weigh expansion or restart plans against uncertain conflict duration and persistently high input costs. For traders and industrial buyers, the conflict underscores the need to integrate maritime security developments and chokepoint analytics directly into procurement and hedging strategies, as fertilizer flows have become inseparable from the evolving military map of the Middle East.