A prolonged war is beginning to feed into food prices, as higher energy and fertilizer costs ripple through the food system.
Fertilizers are at risk, as their supplies are choked at the Strait of Hormuz, a critical shipping corridor for a third of the world’s fertilizer shipments.
More than a quarter of global nitrogen fertilizer trade and about 20% of the world’s oil and liquefied natural gas (LNG) passes through the strait.
Since the start of the conflict, shipping activity across the strait has dropped sharply, disrupting trade flows. Natural gas is both a feedstock and the primary source for producing ammonia, the building block of nitrogen fertilizers.
Major exporters such as Qatar dominates LNG production in the Gulf region and is the world’s third-largest exporter of natural gas after the U.S. and Australia. But transit disruptions and higher shipping risk are tightening availability, raising the input costs for fertilizer buyers.
The Qatar Fertilizer Company (QAFCO), the world’s largest single-site for urea exports and supplier of 14% of the world’s urea, has remained offline for almost a month since Qatar closed its gas plants following the Iran strikes.
The disruption underscores how quickly supply shocks in the Gulf can ripple through global fertilizer markets.
U.S. dependence on fertilizer imports
The U.S is a net importer of fertilizers and so the global trade dynamics are already feeding into the domestic food prices.
The country relies heavily on fertilizer imports, especially for potash, with net imports accounting for more than 90% of total use, according to the U.S. Geological Survey.
While the U.S. is a major fertilizer producer, it still imports more fertilizer than it exports from Canada, Russia and Qatar.
Because fertilizers are globally traded, supply chain disruptions quickly pass through to American farmers in the form of higher input costs.
Global supply chain constraints are tightening
But the risks extend far beyond U.S. agriculture as the war enters its second month.
Gulf Cooperation Council members including Saudi Arabia, Qatar and Oman, supply roughly a quarter of global urea exports. And with increased geopolitical risks, trade to countries that are heavily dependent on imports including India, countries in Africa are particularly exposed.
The problem is exacerbated by the fact that production in India and Bangladesh has been hit by plant shutdowns and maintenance amid limited LNG supplies.
Disruptions in fertilizer flows through the Strait of Hormuz have been described as a “food security timebomb,” by the International Rescue Committee (IRC), with roughly a third of global fertilizer raw material trade passing through the corridor.
Because synthetic fertilizers underpin nearly half of global food production, prolonged supply shocks could have cascading effects on crop yields and food availability worldwide.
Fertilizer prices are already rising
According to DTN’s weekly retail price index, which surveys U.S. agriculture retailers, all eight of the major fertilizers are more expensive compared to last month.
Urea led the way as the nitrogen fertilizer was 35% higher compared to last month. The retail price for liquid fertilizer rose 22% within a week to an average price of $826 per ton from $677 per ton the previous week.
The markets have reflected the supply disruption as urea futures rose to a$690 per ton, the highest since October 2022 and are more than 70% higher this year, as the war in the Middle East severely disrupts global fertilizer markets. After Saudi Arabia, Russia, and Egypt, Iran is the fourth-largest global exporter of urea, the most widely used nitrogen fertilizer.
But since Iran threatened to attack ships, only a limited number of vessels carrying ammonia, nitrogen and sulphur, vital ingredients in many synthetic fertilizer products, are transiting the strait to their destinations.
Bottom line
U.S. fertilizer demand is rising ahead of the spring planting season, particularly in large agricultural economies. Such disruptions could force American farmers to scramble for imports, translating into higher prices at grocery stores.
In a letter to Trump, the American Farm Bureau Federation warned that “failure to act could lead to disruptions to the food supply chain not seen since 2022 when food price inflation reached 40-year highs.”
Food prices are already a political flashpoint.
But the risks are no longer limited to higher grocery bills. If disruptions in the Gulf persist, the shock could ripple through global food systems—raising costs, reducing yields and intensifying food insecurity in the world’s most vulnerable regions.