Eight weeks of conflict in the Middle East have created a fertiliser crisis that threatens to reshape agricultural economics from Brazil to Southeast Asia. Around 24% of the global bulk fertiliser supply is now effectively shut in behind the Strait of Hormuz due to the conflict. The situation will be discussed at Agri-Commodities conference in Geneva next week.
The blockade of Strait of Hormuz by the U.N. could push up to 30 million people into poverty and create a new food crisis, according to the UNDP. The Strait is a key route for the global fertilizer trade and supplies for industrial agriculture. 45% of global sulfur exports come from countries in the Persian Gulf. The current delays could last for months.
The U.S. blockade of Iranian ports is now fully into effect, cutting off Tehran’s international sea trade that powers about 90% of its economy. 70% of American farmers say they won't be able to buy all the fertilizer they need in 2026 because it's too expensive. The situation in the Strait of Hormuz has made things worse for farmers.
Global food prices rose 2.4 percent last month compared with February, according to the FAO’s food price index. Analysts agree that the full impact of the conflict has yet to be felt, due to the lag between rising agricultural input costs and higher prices on shelves. The severity of the fallout depends on how long disruption to shipping continues in Strait of Hormuz.
As tensions disrupt food, fuel and fertilizers flowing through the Strait of Hormuz, Africa’s dependence on imported synthetic inputs is exposed. Up to 50% of Africa's fertilizer supplies originate from Persian Gulf nations. The Africa Fertilizer and Soil Health Action Plan 2024-2034 aims to reduce reliance on imports by fostering local production. The Dangote Group plans to triple its production to 9 million metric tons per annum and build a $2 billion fertilizer plant in Ethiopia.
Chicago wheat futures are up almost 4.5% this week, heading for their biggest weekly jump since February. Dry weather in the US, and the Iran war, are both factors in the rise in fertiliser and diesel prices since the war began at the end of February. Disruptions to fuel, fertiliser, and shipping have rapidly transmitted to import-dependent economies, affecting planting seasons now underway in Somalia, Ethiopia, and Pakistan. The World Food Programme estimates 45 million additional people could be pushed into acute hunger globally. Petrol prices dropped yesterday for the first time since the Iran conflict started, and are a little lower today.
The Strait of Hormuz closure has choked off 30 to 35 percent of global urea trade. The feedstock that makes nitrogen fertilizer possible — natural gas — has risen 70 to 90 percent in price. The current calm is not reliable indicator of future stability because of the significant share of energy costs. The time between a fertilizer shock and a harvest failure is measured in months.
Tensions around Strait of Hormuz have already driven up energy prices and rattled the global economy. The route handles around 20% of global crude exports and is critical for shipments of nitrogen-based fertilizers. Nitrogen fertilizers account for the majority of global use and underpin half of the world’s food production.
José Andrés believes the world is sleepwalking into a massive, multi-year famine. The World Central Kitchen founder points to the "silent" collapse of the global fertilizer trade as a byproduct of the war with Iran. He proposes a 3% "peace tax" based on the total GDP of every country to raise money for food production.
The U.S. Navy is operating in the Gulf of Oman to block vessels leaving Iranian ports in order to pressure Iran to reopen the Strait of Hormuz and forego tolls on the crossing. The disruption of maritime traffic in the Strait has already created economic ripples across the world, especially through rising oil prices. The effects do not remain confined to energy markets, but downstream, affecting agricultural supply chains and household economies. Qatar declared force majeure on LNG contracts following attacks on its facilities. India and Pakistan rely on imported gas. The departure of Western high-income expatriate workers from the Gulf has reduced demand for labor in construction, hospitality and retail sectors.