The Iranian War and Global Fertilizer Market: A Medium-Term Analysis
Vaclav Smil, the renowned energy and environmental analyst, has described ammonia as one of the four indispensable pillars of modern civilization, alongside cement, steel, and plastics. In his writings, Smil emphasizes that ammonia synthesis via the Haber-Bosch process underpins global food production that enables the nitrogen fertilizers essential to sustaining the living of nearly 4 billion people; half of the world’s population. Without ammonia, current agricultural outputs would collapse, making it not merely an industrial chemical, but a foundation of human survival in the modern era.
Fertilizers play an important role in global agriculture by replenishing soil nutrients depleted by intensive farming. Nitrogen fertilizers are especially critical for promoting plant growth, chlorophyll production, and protein synthesis. Ammonia serves as the primary building block directly applied or converted into other forms. Urea, derived from ammonia and carbon dioxide, stands out as the world’s dominant solid nitrogen fertilizer, containing about 46% nitrogen. It is favored for its high nutrient concentration, ease of transport, and versatility across crops. Together, these compounds account for the bulk of nitrogen inputs that have dramatically boosted yields since the mid-20th century, feeding billions and supporting world food security.
The ongoing Iranian war has disrupted the fertilizer market through two primary channels. First, hostilities have severely restricted shipping via the Strait of Hormuz; a chokepoint through which roughly one-third of global seaborne fertilizer trade, significant shares of ammonia and urea exports, and key feedstocks – like liquefied natural gas (LNG) – historically passed. Attacks and closures have slashed tanker traffic, causing massive delays and rerouting that inflated logistics costs. Second, direct strikes on production facilities across the Arabian Gulf, including the Gulf Petrochemical Industries Company (GPIC) in the Kingdom of Bahrain, Qatar’s Ras Laffan complex, Abu Dhabi’s Fertil Plants in Ruwais Industrial Zone, and other related infrastructure have damaged plants and curtailed output. Arabian Gulf producers are reliant on abundant natural gas and have seen capacity offline, compounding shortages as regional energy supplies tighten.
India, the world’s second-largest fertilizer consumer, faces acute challenges due to its heavy reliance on Arabian Gulf supplies. The country sources a substantial portion – often 40-70% of its urea imports and around 40% of Diammonium Phosphate (DAP) – from Gulf Cooperation Council (GCC) countries such as Oman, Qatar, Saudi Arabia, and the UAE, with much of this transiting the Strait of Hormuz. Moreover, India imports a large share of its LNG and ammonia feedstock from the region to fuel domestic urea plants. Disruptions have already triggered production cuts at Indian facilities, elevated import costs, and forced emergency measures like front-loading purchases and subsidy hikes. With the critical Kharif planting season approaching, these shortages threaten reduced application rates on staples like rice and wheat, directly endangering yields for hundreds of millions.
In medium-term analysis spanning the next 12-24 months, the world may face sustained volatility rather than quick resolution. Even if shipping lanes reopen partially, restarting damaged facilities will require months amid ongoing security risks and capital needs. Fertilizer prices are already sharply higher, and are likely to remain elevated as alternative suppliers in Russia, China, or North America ramp up but face their own constraints like energy costs and capacity limits. Developing countries dependent on imports, especially India, will bear the brunt with potential extended plant shutdowns and higher fiscal burdens from subsidies.
This disruption profoundly threatens world food security. Higher fertilizer costs will force farmers, during key planting seasons, to reduce application rates or shift to less input-intensive crops, potentially lowering yields of staples like corn, wheat, and rice. In India, this risks lower harvests, spikes food price inflation, and puts immense pressure on public stocks. Reduced global output could drive broader hunger in vulnerable regions and spark social unrest. In the medium term, global stocks may buffer some shocks, but persistent shortages risk a repeat of past crises, underscoring the fragility of fertilizer supply chains intertwined with geopolitics and energy. This is why policymakers worldwide must prioritize diversified imports, strategic reserves, and accelerated efficiency innovations to mitigate long-term risks to the food system that rests so heavily on Smil’s critical pillar.
Ali Ebrahim Faqeeh – Senior Analyst in the Economic Studies Program (Derasat Center)
