Disruptions through Strait of Hormuz could ignite global food crisis

While much of the global attention has focused on the disruption the closure of the Strait of Hormuz could cause to oil and liquefied natural gas (LNG) markets, fertilizers may represent an equally serious threat to global supply chains if the situation persists.

The conflict involving Iran is already driving up energy and fertilizer prices, raising concerns about a renewed wave of food inflation as farmers brace for potential shortages that could reduce crop yields, according to an analysis by Deutsche Welle.

Countries in the Gulf region account for roughly 20 percent of global traded volumes of key fertilizers, including ammonia, phosphates and sulfur, according to data from maritime intelligence firm Signal Group.

Nearly half of the world’s traded urea, the most widely used nitrogen-based fertilizer, originates from the Gulf, with Qatar alone supplying about 10 percent of global demand, according to Bloomberg Intelligence.

Production disruptions have already begun to emerge. After Iranian strikes targeted the massive industrial complex at Ras Laffan Industrial City — the world’s largest LNG and fertilizer hub — state energy giant QatarEnergy halted operations, sidelining hundreds of thousands of tons of critical fertilizer nutrients and precursors.

The conflict risks creating what analysts warn could become the third major global food security shock in six years, following the economic disruption of the COVID-19 pandemic and supply shocks triggered by Russia's war on Ukraine in 2022.

Since fighting began, fertilizer prices have risen between 10 and 30 percent, although they remain around 40 percent below the peaks recorded immediately after the start of Russian military attacks on Ukraine, according to market data.

The potential impact of a prolonged closure of the Strait of Hormuz could be severe. Data from the United Nations Conference on Trade and Development (UNCTAD) show that roughly 1.33 million tons of fertilizer pass through the strait each month, meaning even a 30-day disruption could trigger shortages affecting major crops such as corn, wheat and rice, all of which rely heavily on nitrogen fertilizers.

"Higher prices will affect crop choice," Joseph Glauber, senior research fellow at the Washington-based International Food Policy Research Institute (IFPRI), told DW. "Farmers may go with the crop that needs less fertilizer rather than the one that needs nitrogen-intensive fertilizer, to avoid higher input costs."

Glauber warned that farmers — particularly in poorer countries — may simply reduce fertilizer use altogether, a decision that could significantly cut agricultural output.

Other major fertilizer producers, including Russia, China, United States and Morocco, have only limited spare capacity and may struggle to rapidly increase production to offset supply disruptions. China has previously restricted exports of phosphate and nitrogen fertilizers but could face pressure to ease those controls.

"Nitrogen can be produced anywhere where there's natural gas or coal, unlike potash or phosphates, where you are dependent on mineral deposits to mine," Glauber, a former senior economist at the United States Department of Agriculture, said. "But the high cost of natural gas is really the issue," as production increases could be uneconomical.

Beyond fertilizers themselves, rising oil prices also threaten to push food costs higher. Fuel powers farm machinery, transportation networks, food processing plants and refrigeration systems, meaning surging energy prices could affect nearly every stage of global food production.

By Nazrin Sadigova