The war in Iran is causing serious disruption not only in energy markets but also in the global supply of fertilisers, with consequences that threaten to affect food production and consumer prices.
A large portion of fertiliser shipments has become stranded on the other side of the Strait of Hormuz, a crucial maritime passage through which nearly one third of the global supply is transported. Ship traffic remains restricted and operates under strict control, with some vessels moving only through corridors supervised by Iran’s Islamic Revolutionary Guard Corps, requiring special permits and escorts.
At the same time, rising natural gas prices, a key raw material for fertiliser production, have led to reduced or suspended production in countries such as India, Algeria and Slovakia. Meanwhile, China has limited its exports, further increasing pressure on the global market.
Impact on agricultural production
The effects are already visible in agricultural production. In Australia, wheat producers are reducing cultivation as the higher cost of fertilisers makes their use at the same scale economically unviable. In the United States, farmers growing corn and soybeans are pressing the government for financial support, warning that production costs are rising at a time when agricultural product prices are not increasing at the same pace.
Price increases are already evident. According to analyses, the price of urea rose by around 50% during the first weeks of the conflict, while ammonia recorded an increase of about 20%. These rises are gradually being passed on to farmers and are ultimately expected to affect food prices.
The Middle East is a key hub for global fertiliser production, largely due to its abundant natural gas reserves. Disruptions in supply from the region have caused significant price increases, according to market analysts, with countries dependent on imports, such as India, facing a higher risk of shortages.
The effects are not limited to agriculture. The World Trade Organization has warned that the conflict has destabilised trade in energy, fertilisers and food at a time when the international trading system is already under pressure from geopolitical tensions and climate-related challenges.
Risks for the global supply chain
Disruptions are also spreading to other critical sectors of the global economy. The Gulf region is a major supplier of aluminium, widely used in the automotive and aerospace industries, as well as helium, which is essential for semiconductor production. The restricted flow of goods from the region is already affecting these supply chains.
At the same time, delays are being reported in shipments of pharmaceuticals and medical equipment from India, as well as in technological products such as semiconductors and batteries from other Asian countries. These effects are linked both to transport delays and to rising energy costs.
Transport costs have also increased significantly. Many ships are now avoiding passage through the Middle East and are following alternative routes, such as around the Cape of Good Hope in southern Africa. This has led to freight rates rising by 30% to 70% in some cases, while insurance premiums for transit through high-risk areas are also increasing.
Higher energy prices are further increasing transport costs and affecting aviation, shipping and industrial production overall. Delays and higher costs are gradually spreading throughout the supply chain.
At the same time, the ability of other countries to fill the gap in fertiliser supply remains limited. Russia, one of the world’s largest producers, is struggling to increase exports as some of its infrastructure has been attacked in the context of the war in Ukraine.
Analysts estimate that, among the economic consequences of the conflict, those related to fertilisers could prove the most extensive due to their direct connection with food production and, consequently, the cost of living.
The effects are particularly noticeable in the United States, where farmers are entering the spring planting season. Many have already purchased fertilisers, but those who have not may face significantly higher prices.
Although the United States is a major fertiliser producer, it remains a net importer, sourcing supplies from countries including Canada, Russia and Qatar, which makes the domestic market vulnerable to international disruptions.
Pressure on producers and governments
In an attempt to limit price increases, the Trump administration has lifted sanctions on fertiliser imports from Belarus and Venezuela. At the same time, agricultural organisations are pushing for additional measures, such as removing tariffs on phosphate fertilisers from Morocco and Russia.
Donald Trump is expected to announce financial support measures for farmers, at a time when the sector is already under pressure due to tariffs and rising labour costs.
The current crisis recalls the shock caused by Russia’s invasion of Ukraine in 2022, when sanctions on Russia and Belarus triggered a surge in energy and fertiliser prices, driving food prices higher as well.
However, that crisis had a more immediate impact on food supply because Ukraine’s agricultural production itself was affected, as the country is one of the world’s main grain exporters. Ports in the Black Sea were closed and large areas of farmland remained uncultivated.
For now, fertiliser prices have not reached the levels seen during that period, but it remains uncertain how long the conflict in the Middle East will last.
Analysts warn that if the crisis continues, rising fertiliser costs will inevitably be passed on to food prices, intensifying pressure on the cost of living worldwide.
Source: Lifo.gr