U.S.-Iran Conflict Drives Fertilizer Price Surge, Threatening Southeast Asian Crop Yields
A surge in global fertilizer prices, triggered by escalating tensions between the U.S. And Iran, is emerging as a significant risk to Southeast Asia’s agricultural outlook. The situation potentially constrains fertilizer utilize and undermines grain production in the 2026/27 crop cycle, according to a recent report by BMI, a unit of Fitch Solutions.
Analysts warned in a research note released on March 24, 2026, that rapidly rising costs for nitrogen fertilizers could force farmers across the region to cut application rates as key planting seasons approach.
Rising Fertilizer Costs
Global urea prices have surged since geopolitical tensions intensified on February 28, 2026. The U.S. Gulf New Orleans granular urea spot index climbed 40.4%, reaching US$660 per tonne as of March 20, 2026. As of March 26, 2026, market participants reported some Southeast Asian tenders already approaching US$710 per tonne, reflecting continued supply disruptions and tightening availability.
The price spike underscores growing concerns over constrained global supply. The conflict has directly affected production and logistics across Gulf Cooperation Council (GCC) economies, which accounted for roughly 20% of global nitrogen fertilizer exports in 2024. Shipping uncertainty, energy market volatility, and operational risks in the region have collectively tightened export flows.
Impact on Agricultural Yields
Sustained high fertilizer costs could translate directly into weaker crop performance. Nitrogen-based fertilizers are critical for staple grains such as rice, corn, and wheat, and reduced application typically leads to lower yields and declining farm productivity.
BMI expects impacts to be uneven across markets, reflecting differing production structures, policy responses, and exposure to imports.
Regional Outlook
- Relatively Insulated Markets: Indonesia, Malaysia, and Vietnam are expected to remain comparatively resilient. These countries benefit from stronger domestic fertilizer production capacity and access to local natural gas feedstock, the key input for nitrogen fertilizer manufacturing.
- More Exposed Markets: The Philippines faces the greatest vulnerability due to its heavy reliance on imported fertilizers to sustain agricultural output, leaving farmers more sensitive to global price volatility.
As the conflict persists, the ability of Southeast Asian governments to subsidize inputs or secure alternative trade routes will be the deciding factor in preventing a broader food price crisis in the 2026/27 cycle.