Fertilizer prices soar due to Iran war, prompting warnings about food security

Farmers in the Northern Hemisphere are entering a critical period in spring, when they must begin extensive field work. Meanwhile, our southerners are busy harvesting crops before winter sets in.

But their work comes as the Iran war has severely constrained the supply of essential fertilizer products, triggering significant price increases and warnings of impending food insecurity.

According to the United Nations, about one-third of the world’s seaborne fertilizer trade passes through the Strait of Hormuz.

The waterway, a key shipping route along Iran’s southern border, has been severely disrupted since the start of the war, with traffic virtually halted and several ships hit by projectiles in or near the waterway.

The price of fertilizers, much of which is produced in the Middle East, has soared since the United States and Israel launched attacks on Iran on February 28th.

Fertilizer futures contracts are less liquid than other products, making prices more uncertain. But analysts working in the sector told CNBC they have seen the price of Egypt’s FOB granular urea, a precursor to nitrogen fertilizer, jump from $400 to $490 per tonne before the outbreak of the war to about $700 per tonne.

Oxford Economics’ Alpine Macro said in a note on Monday that prices for urea and ammonia have risen by about 50% and 20%, respectively, since the start of the war. Other fertilizers such as potash and sulfur also saw their prices rise.

The Middle East is a particularly large exporter of urea and nitrogen products, said Chris Lawson, vice president of market intelligence and pricing at CRU.

“The vast majority of world trade is currently unable to move because the Strait of Hormuz is effectively blocked,” Lawson said. “Currently, we estimate that around 30% of exportable suppliers are not actually supplied to the market: Saudi Arabia, Qatar and Bahrain, but this also includes Iran.”

Lawson said Iran is an important producer and one of the world’s largest exporters of nitrogen-based fertilizers.

“Much of the traded supplies are at risk. Thirty percent of the world’s urea trade comes from Iran and countries bound by Hormuz,” he told CNBC.

“This is a long supply chain, and if farmers can’t get the urea they need, crop yields will inevitably decline. Nitrogen is the main nutrient needed for crop growth (and) there are stocks that can be drawn down, so we won’t really see any impact on crop yields or crop yield losses until later this year.”

Dawid Hale, co-portfolio manager for Global Natural Resources Strategy at Ninety-One, told CNBC that the reason nitrogen fertilizers such as urea are at the forefront of the Middle East crisis is because, unlike other fertilizer groups such as potash and phosphates, nitrogen is “one element that needs to get to the factories every year.”

“You can skip the potash season, you can skip the phosphate season, but you can’t skip the nitrogen season,” Hale said.

Farmers in the Northern Hemisphere are set to start fertilizing their fields, with supply constraints intersecting with cyclical demand. One of the most used fertilizers in the world, urea is used to grow a variety of crops, including corn, wheat, rapeseed, and some fruits and vegetables.

“Ultimately, there is a direct correlation between nitrogen application and agricultural yields,” Hale says. “That’s why I’m much more concerned about the current crisis than I was four years ago with the Russia-Ukraine crisis.”

When the Russian government launched its full-scale invasion of Ukraine in early 2022, both countries were major exporters of fertilizer, and Russia accounted for a significant portion of the world’s potash production. Sanctions on Russian exports added further pressure to a market already suffering from shortages, pushing up prices.

“To me, this is starting to feel like it could get much worse, because it could really impact crop yields in many regions and across major crops like corn (and other major crops),” Hale added, noting that most fertilizer futures prices have shown double-digit increases in the weeks since the war began.

Sarah Marlow, global head of fertilizer pricing at Argus, agreed that the unfolding crisis in the Middle East will have a bigger impact on the fertilizer trade than the Russia-Ukraine war.

“Nearly 50% of the sulfur traded globally comes from this region. In the case of urea, about a third of all urea traded globally comes from the region, and in the case of ammonia, it’s close to 25%,” Marlow told CNBC via video call.

“I mean, it’s huge. It’s so important, it’s affecting multiple producers, so in some ways it’s more important than the Ukraine impact.”

“I’m not just talking about one or two,” she added, noting that exports from Saudi Arabia, Kuwait, Qatar, Iran and the UAE have all been affected.

“The sulfur market was already structurally tight before this started, and we were already seeing price peaks in January,” Marlow said. “Now, with more production being taken offline and unable to be exported and leaving the region, we are likely to see further shortages and further price increases as a result.”

Fertilizer production has also been hit by a lack of storage options for products that cannot be shipped and the shutdown of some energy facilities in the Middle East.

Earlier this month, Qatar Energy announced it would halt downstream urea production following the decision to halt liquefied natural gas production.

Meanwhile, China, another major fertilizer exporter, has placed restrictions on exports to protect its domestic market from shortages, news agency Reuters reported last week.

Ninety-One’s Hale said the market entered 2026 with significantly higher stocks of basic food items that rely on fertilizer supplies, meaning there are “buffer stocks” that could help make up for some shortfalls in corn, wheat, soybeans and rice.

“If this year’s crop yields were affected by 5%, I don’t think it would take hunger into account, but it would definitely cause food inflation,” he told CNBC, noting that emerging market countries would likely bear the brunt of the impact.

“Unfortunately, the world’s poorer countries are far more exposed to these crises,” Hale said. “For example, I think some African countries that import a lot of grain will be affected.”

Hale added that India imports nitrogen fertilizer as well as natural gas for domestic production and is likely to be exposed to shortages.

“I’m more concerned about (countries) like India and regions like East Africa that are going to be more vulnerable,” he said. “Emerging markets east of Suez and the Global South are very often the last markets to buy[inflated prices].”

But he noted that the United States is not completely immune to the effects of fertilizer price shocks, noting that although the United States produces large amounts of nitrogen fertilizer at home, it is “not self-sufficient.”

According to the American Fertilizer Association, about one-third of the nitrogen, phosphate, and potassium fertilizers used in the United States are imported.

“It’s going to be inflationary for farmers,” Hale said of rising fertilizer prices spilling over into the United States. “Are there going to be areas where fertilizer is not available or will have to be rationed?”

A total of 54 farm organizations recently sent a letter to US President Donald Trump asking for “much-needed market relief for America’s farmers” amid rising fuel and fertilizer prices.

“The closure of the Strait of Hormuz has caused fuel and fertilizer prices to rise as the planting season begins in earnest across much of the United States,” they said. “Disruptions to maritime transport due to the ongoing conflict in Iran are having serious implications for domestic and global food security.”