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The world has become well versed in the importance of the strait of Hormuz to the world’s energy flows, but attention is increasingly turning to its vital role in another market – the fertiliser on which harvests depend.
A third of the global trade in raw materials for fertiliser passes through the maritime choke point, which is also the route for 20% of shipments of natural gas, which is required to make it.
The waterway’s near-total shipping blockade is a “food security timebomb”, the head of the International Rescue Committee, David Miliband, said this week, adding: “The window to avert a massive global hunger crisis is rapidly closing.”
“Fertilisers are the No 1 issue of concern today,” according to the World Trade Organization, while the UN World Food Programme says the total number of people facing acute levels of hunger could hit record numbers this year if the destabilising conflict continues.
So how worried should we be?
The Gulf is also home to some of the world’s largest fertiliser factory sites and international organisations are sounding the alarm that a prolonged transport shutdown could disrupt production and increase costs.
About 16m tonnes of fertilisers were transported by sea from the region in 2024, according to the UN conference on trade and development (Unctad). After Russia, Egypt and Saudi Arabia, Iran is the fourth-largest global exporter of urea, the most widely used nitrogen fertiliser.
The Middle East is also the source of about 45% of the global trade in sulphur, a key raw material for fertiliser manufacture, as well as for producing various metals and industrial chemicals.
But since Iran began threatening to attack shipping, only a trickle of vessels carrying ammonia, nitrogen and sulphur, vital ingredients in many synthetic fertiliser products, are transiting the strait to their destinations.
The Qatar Fertiliser Company (QAFCO), which is the world’s largest single site for urea exports and the supplier of 14% of the world’s urea, has been offline for almost a month since Qatar closed its gas plants after Iranian strikes.
Doha does not have an alternative route for exporting urea other than through the strait of Hormuz, while it also relies on shipments through the channel for food imports for it and the neighbouring United Arab Emirates.
Roughly half of global food production depends on synthetic nitrogen fertiliser. Without it, crop yields would tumble, pushing up prices of household staples including bread, rice, potatoes and pasta, and would also make animal feed more expensive. Some of the world’s poorest countries are among the most vulnerable to fertiliser price rises.
Farmers are facing a “double shock” because of surging prices for fertiliser and fuel, according to the UN’s Food and Agriculture Organization. The agency also fears a lengthy closure of the strait could limit global supplies.
Prices have already jumped in the month since the conflict began, bringing back bad memories of soaring fuel and fertiliser prices after Russia’s invasion of Ukraine in 2022, as well as the global fertiliser crisis of 2008 that was sparked by high oil prices.
Egyptian urea prices, which are a benchmark, have risen by more than 60%, reaching $780 (£586) a tonne, up from about $484 in late February, according to the CRU Group, a consultancy that tracks commodity prices.
The costs of different types of fertiliser – including diammonium phosphate (DAP), urea and potash – have not yet hit the levels seen in 2022, to the surprise of some analysts, although they caution that prices remain under pressure.
How high they go is partly dependent on when Hormuz reopens. In the meantime, “the fertiliser market is in paralysis waiting for the conflict to end,” said Chris Lawson, the vice-president of market intelligence and prices at CRU.
“Supply disruption has been bad and people are still scrambling for product, but it is not as bad as it potentially could have been.”
Lawson added that some fertiliser buyers have also decided to wait it out if they can, in the hope that prices drop again whenever the conflict ends and normal trade resumes.
For now, the world’s fertiliser plants could soon max out their storage facilities and have to curtail production if they continue to be unable to transport away their produce or receive new raw materials.
A US move to try to minimise the economic consequences of the Iran conflict by loosening sanctions on Belarusian companies that produce potash – a key ingredient in fertiliser – as well as the suspension of sanctions on Russian oil, are not expected to increase global fertiliser supplies, according to analysts.
This is because Russia continued to export fertiliser to countries outside Europe and North America and has little spare capacity to ramp up production to meet higher demand.
The impact of the fertiliser price increases for different nations is partly dependent on their reliance on fertilisers imported from the Gulf, as well as the timing of the conflict in relation to the agricultural cycle.
While many European and North American farmers had already bought most of the fertiliser required for the imminent spring planting season, the timing of the latest fertiliser price rises is putting particular pressure on large importers, including Australia, where the majority of fertiliser shipments arrive between April and June.
There are also growing worries about the impact of extended shipping disruption on India, the world’s second-largest user of fertiliser after China, where the sowing season for major crops including rice and wheat is approaching. India depends on imports of the raw materials to produce fertiliser, such as liquefied natural gas, as well as the finished product.
While the Indian government subsidises fertiliser for the nation’s food producers, any disruption to supply could reduce food production and push prices higher.
India’s less affluent neighbours, including Sri Lanka, Pakistan and Bangladesh, are almost all dependent on imports of Gulf fertiliser. African nations including Malawi, Tanzania, Uganda, Kenya and Sudan are also reliant.
The world’s least developed economies have the least capacity to absorb price shocks, and increased costs for fertiliser, fuel and food can quickly put pressure on household budgets and public finances.
Food prices have not yet risen on global commodity markets, given the Middle East is not a major exporter of wheat and other crops, as Russia and Ukraine are. However, the longer-term effect on supplies and wholesale costs could be serious if the war’s upending of trade routes is not resolved for months.
