Iran War Hits Fertilizer Markets Hard

Market Analysis

The war against Iran has rippled far beyond energy markets, threatening supplies of key raw materials that underpin global food production. Disruptions to shipping through the Strait of Hormuz, direct attacks on regional infrastructure and sanctions already in place have sent prices for fertilizer feedstocks sharply higher and raised the risk of food price inflation with analysts warning of potentially severe consequences for vulnerable countries in the global South.

The conflict has first and foremost roiled energy markets because the Persian Gulf region plays a central role in global oil and LNG supplies. But the shock is broader: many commodities that pass through the Strait of Hormuz account for large shares of world trade in fertilizer inputs. According to industry data cited in market reports, roughly 44% of global sulfur shipments, 31% of urea (a key nitrogen fertilizer), 18% of ammonia transports and 15% of phosphate flows traverse the strait. Those raw materials are essential for producing nitrogen- and phosphate-based fertilizers: urea is synthesized from natural gas (via the Haber-Bosch process) and sulfur is critical for producing phosphate fertilizer.

Goldman Sachs and other market watchers have already recorded large price moves: ammonia prices have jumped by more than 30%, nitrogen fertilizer costs are up around 30% and sulfur prices rose about 25%. Those increases will feed through into higher fertilizer prices globally and with an estimated lag of about six months into more expensive food. Higher input costs will further strain European agriculture, which already faces complications caused by sanctions on potash/kalium fertilizer from Russia and Belarus. For many countries in the developing world, the result could be sharply reduced affordability of staples and increased risk of hunger.

A further amplification of pressure comes from interruptions to LNG supplies from Qatar. Natural gas typically accounts for roughly 80% of the cost of producing many nitrogen fertilizers. With Qatars liquefied natural gas exports offline, producers will face materially higher feedstock costs. Even if facilities are not permanently damaged, market participants expect it could take at least a month and possibly much longer if infrastructure is destroyed before LNG output returns to pre-conflict levels.

Broader Commodity Effects and Industry Impact

The shock extends beyond fertilizers. Helium supply is also under threat: U.S. Geological Survey data show that last year Qatar accounted for about one-third of global helium production (with the United States supplying roughly 42.6%). Helium is indispensable to high-tech industries from cooling superconducting magnets in MRI machines to semiconductor manufacturing and fiber-draw processes and a prolonged shortfall could produce supply-chain bottlenecks similar to those seen during the Covid-19 pandemic.

Aluminum markets have felt the impact as well. The Gulf Cooperation Council countries contribute around 9% of global aluminum production. Early in the conflict aluminum prices on the London Metal Exchange surged to a four-year high near $3,500 per tonne. The effects on petrochemical and metals-processing hubs are severe in states such as Bahrain, where oil and aluminum form the backbone of the economy and public finances were already stretched prior to the war.

Logistics and transport costs are rising too. The Gulf region is a major global logistics hub; disruption there has pushed ship fuel costs up by roughly 35% and jet fuel prices have roughly doubled. Additional rerouting of cargo around conflict zones will increase transit times and costs across global supply chains. The United States is less exposed to many of these specific supply bottlenecks because it produces most of the mentioned raw materials domestically in volumes sufficient for internal demand.

Taken together, the commodity price jumps and logistics disruption create a compound risk for global inflation and food security. Policymakers and market participants are watching closely for signs of wider production outages, for further sanctions that could tighten markets, and for geopolitical shifts that might either deepen or help resolve the supply squeeze. For farmers, food processors and governments in import-dependent countries, the near-term outlook means higher costs and tighter margins and for many vulnerable populations, a worsening of affordability and access to food.