How is the Strait of Hormuz crisis triggering a global shock in the fertilizer market?

Global fertilizer and ammonia trade is facing significant pressure due to the effective closure of the Strait of Hormuz, amid ongoing uncertainty surrounding diplomatic negotiations between the United States and Iran.

According to Rystad Energy’s 2025 global trade map, around 15% of global ammonia trade and 21% of urea trade—a nitrogen-rich fertilizer—are tied to exporters that could be affected by the strait’s closure. These include major Middle Eastern producers such as Saudi Arabia and Qatar, in addition to Kuwait, Bahrain, the United Arab Emirates, Iran, and Iraq.

The firm’s analysis indicates that continued logistical disruption could threaten the already strained ammonia and urea markets, with potential spillovers into food and agricultural supply chains, particularly in countries most dependent on these trade flows.

Risks to Food Security

Minh Khoi Le, Senior Vice President and Head of Global Hydrogen at Rystad Energy, said the message to policymakers and buyers is clear: energy security is directly linked to food security.

More than one-fifth of urea exports from Middle Eastern producers directly impact agricultural output. India is among the most exposed, importing between 6% and 8% of its fertilizers from Gulf countries.

A prolonged closure of the strait could quickly translate into tangible economic risks, including potential food shortages, disruptions in industrial production, water supply challenges, and broader global risks depending on the duration of the conflict.

Most Exposed Countries

Beyond India, several Asia-Pacific countries rely heavily on fertilizer flows passing through the strait, including South Korea, Thailand, and Australia.

Countries in the Americas are also dependent on these supplies, particularly the United States and Brazil.

In the event of supply disruptions, major importers—led by India and South Korea—would need to seek alternative sources to meet their ammonia demand.

Rising Global Production Costs

Producers with assets in other regions may ramp up output, but these facilities are typically located in higher-cost regions such as Europe. This could drive up food prices and increase global inflationary pressures.

Can Green Ammonia Be the Solution?

Some experts see green or e-ammonia—produced using renewable energy instead of fossil fuels—as a potential long-term solution to enhance supply security.

The concept previously gained attention as a way to strengthen Europe’s energy security following Russia’s invasion of Ukraine in 2022, but it has yet to achieve widespread adoption. Pilot projects are currently underway in China, though its ability to replace conventional fertilizers remains uncertain.

While green ammonia production is generally more expensive, recent tenders in India have shown prices close to those of conventional ammonia.

Recent agreements in this space include a deal between Uniper and AM Green to produce green ammonia in India for export to Europe, as well as offtake agreements between Yara International and ATOME Energy in Uruguay.

However, most of these projects are not expected to begin production before 2030, limiting their ability to ease near-term market pressures.

Scale of Trade at Risk

Global ammonia trade stood at approximately 10.9 million tonnes annually in 2025, down from 12.3 million tonnes in 2024. Around 15% of this trade could be affected if the Strait of Hormuz remains closed, particularly supplies originating from Saudi Arabia’s eastern coast.

Global urea trade reached about 50.8 million tonnes annually in 2025, of which roughly 10.6 million tonnes originate from countries impacted by the disruption, notably Saudi Arabia, Qatar, and the UAE.

Of these volumes, approximately 2.2 million tonnes were exported to India, underscoring its heavy reliance on Middle Eastern fertilizers.

Other major importers of urea from the region include Thailand, Australia, Brazil, and the United States.

Mounting Pressure on Fertilizer Trade

This is not the first shock to hit the global fertilizer market. Russian exports declined significantly following the war in Ukraine, yet still accounted for around 5% of global ammonia trade and 15% of urea exports in 2025.

Recent developments in the Middle East add another layer of risk to an already strained global fertilizer market, highlighting the concentration of supply among a limited number of producers and critical maritime chokepoints.