The Strait of Hormuz, which is causing concern not only among investors but also politicians and drivers, is a key transit route for 20% of global oil and LNG. However, disruptions to shipping are also affecting other commodities that can indirectly strain household budgets. These include fertilizers and their input materials. Roughly one third of global seaborne fertilizer trade passes through this strait. With transport activity nearly at a standstill since the start of the conflict, prices are rising sharply just as farmers in the Northern Hemisphere enter the most critical weeks of the year.
Countries in the Persian Gulf produce around 20% of phosphate fertilizers and about a quarter of global sulfur output, much of which is a byproduct of oil and natural gas extraction. Prices of urea, the most widely traded fertilizer, have surged by as much as 40–50% in recent weeks. Ammonia prices are up roughly 20–25%. Across different fertilizers, price increases range between 30% and 70%. Stock markets are also reacting to this price increase. Shares of CF Industries, an American fertilizer manufacturer and distributor, have risen by 20% over the past month and by as much as 56% since the beginning of the year.
The timing could hardly be worse. Farmers typically place fertilizer orders in March for April and May. Nitrogen, in particular, cannot be skipped like some other nutrients. Crops such as wheat, corn, rapeseed, and a wide range of fruits and vegetables depend on it in every growing cycle.
India is among the most exposed, importing around 80% of its ammonia from the Persian Gulf. Brazil is also facing significant challenges. China has moved to restrict its own fertilizer exports to protect domestic supply, effectively removing one of the key suppliers from the global market.
Europe imports less of its fertilizer from the Gulf, but even so it is not immune. Higher import prices and rising costs are feeding into the agricultural economy, on top of already elevated diesel prices, which rose by 45% in March. These input costs will ultimately be reflected in food prices at the store.
The situation in the Middle East is therefore impacting global economies from multiple angles. A swift ceasefire and the reopening of shipping through Hormuz are critical not only for investors, but also for consumers who are already facing sharply rising living costs.
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