Strait of Hormuz Disruption Threatens Global Food Supply Beyond Oil Prices

In the wake of U.S. And Israeli strikes on Iranian military infrastructure, financial markets have focused on potential oil price spikes. However, a potentially more significant long-term risk lies in the vulnerability of the global natural gas and nitrogen fertilizer supply chains. A significant restriction of commercial shipping through the Strait of Hormuz would extend beyond fuel markets, directly impacting global food production.

The Energy-Food System Link

Nitrogen fertilizer production is heavily reliant on natural gas. The Haber-Bosch process converts methane into ammonia, which is then used to create urea and other nitrogen products. Essentially, nitrogen fertilizer is natural gas transformed into plant food. Approximately half of global food production depends on synthetic nitrogen and disruptions to its supply could have severe consequences for crop yields.

Globally, around 180 million metric tons of nitrogen fertilizers are consumed annually. Roughly 55 to 60 million metric tons of urea are traded internationally each year, with the Middle East accounting for approximately 40% to 50% of that volume. Nearly all of these exports transit the Strait of Hormuz.

close to one-quarter of globally traded nitrogen fertilizer—and a meaningful share of total global nitrogen production—moves through this single, now-threatened maritime chokepoint.

Concentrated Export Capacity

The scale of fertilizer production clustered around the Strait of Hormuz is substantial:

• Qatar: Exports roughly 5.5 to 6 million metric tons of urea and ammonia annually from its QAFCO complex.
• Iran: Exports around 5 million metric tons of urea per year, representing roughly 10% of global trade.
• Saudi Arabia: Contributes approximately 4 to 5 million metric tons annually through SABIC and related producers.
• Oman & UAE: Collectively add several million metric tons.

Collectively, these nations account for over 15 million metric tons of annual export capacity. Including ammonia and related nitrogen products, the exposure rises further.

Limited Buffer Capacity

Unlike oil, the fertilizer market lacks a significant strategic reserve. The United States maintains a Strategic Petroleum Reserve, but there is no equivalent stockpile of nitrogen fertilizer to offset a prolonged disruption. Fertilizer trade operates on a just-in-time basis, with seasonal demand aligning with planting cycles and limited inventory to absorb geopolitical shocks.

Timing and Agricultural Impact

Fertilizer procurement accelerates in the Northern Hemisphere ahead of spring planting. Delays during this period force farmers to produce difficult choices: reduce nitrogen application rates, switch crops, or accept higher costs. Lower nitrogen application generally leads to lower yields, even with modest reductions impacting key crops like corn, wheat, and rice.

The world experienced a similar dynamic in 2022 following Russia’s invasion of Ukraine, when fertilizer prices surged and farmers in several regions reduced usage. While yields proved resilient in some areas, the event highlighted the sensitivity of food systems to fertilizer availability, and pricing.

Replacing 10 to 20 million metric tons of annual export capacity from the Gulf would be challenging. New ammonia plants require years to permit and construct, and existing facilities typically operate near capacity.

Global Exposure

Reliance on Gulf nitrogen is widespread:

• India: Heavily depends on imported LNG—much of it from Qatar—to fuel its domestic urea production.
• Brazil: Imports substantial volumes of Middle Eastern urea for its soybean and corn production.
• United States: A major fertilizer producer, but still imports a significant portion through the Strait of Hormuz.

Beyond Oil Prices: A Slower-Moving Crisis

While oil price spikes are immediate and visible, fertilizer disruptions operate on a slower, but potentially more consequential, timeline. Reduced nitrogen availability today can translate into lower crop yields months later, leading to tighter inventories, higher feed costs, and elevated food prices.

Modern agriculture is fundamentally an energy conversion system: natural gas becomes ammonia, ammonia becomes nitrogen fertilizer, and fertilizer becomes calories. If the Strait of Hormuz faces sustained disruption, monitoring urea benchmarks and ammonia export flows may be more critical than tracking Brent crude prices.

Energy security and food security are intertwined. When a single chokepoint handles a large fraction of both oil and nitrogen fertilizer trade, the implications extend far beyond the fuel market.