LAUSANNE (Realist English). Disruption to energy flows through the Strait of Hormuz is exacerbating the risk of a global food shock, as higher gas prices squeeze fertiliser production and other sectors outbid agricultural producers for key inputs and logistics, traders warned at the FT Commodity Summit in Lausanne on April 21.
The narrow Gulf waterway handles roughly a fifth of global oil and liquefied natural gas (LNG) exports and about a third of the seaborne fertiliser trade, making it a critical artery for food production as well as energy markets.
“We are living on borrowed time,” said Pablo Galante Escobar, head of LNG at Vitol.
Fertilisers under pressure, harvests at risk
Reduced LNG flows through the strait have already curbed industrial consumption. Escobar said about 40 per cent of the decline in gas demand had come from factories, particularly fertiliser plants, since the US and Israel launched strikes on Iran in late February. Natural gas is a key feedstock in nitrogen fertilisers such as ammonia.
“This is not sustainable — or the energy crisis will become a food crisis,” he warned, noting that reduced fertiliser availability would weigh on crop yields and push up food prices in coming seasons.
Logistics collapse: Panama Canal and freight
The disruption to shipping caused by the Middle East war (including Iran’s closure of the strait and the subsequent US naval blockade) is also spreading through global logistics. Congestion at the Panama Canal has intensified as Asian buyers turn to crude oil exported from the US Gulf in place of Middle Eastern supplies, with tankers outbidding bulk carriers for scarce transit slots.
According to Louisa Follis, head of dry bulk analysis at shipbroker and marine consultancy Clarksons, ships carrying lower-value cargoes such as grain are facing rising freight costs and delays. Waiting times at the canal have stretched to around 40 days as oil tanker operators pay millions of dollars to skip to the front of the queue.
On some grain routes, shipping rates have already increased by 50 to 60 per cent, she said. That is adding to pressure on US farmers, who are already struggling to compete with lower-cost producers such as Brazil, as higher freight rates erode margins and make it harder to reach emerging markets. Higher bunker fuel costs are compounding the strain by forcing ships to slow down, reducing effective capacity across dry bulk markets. “That is introducing inefficiency to the system overall,” she added.
Market not pricing long-term risk
Agricultural traders warn that markets have yet to fully price in the risk of prolonged disruption to fertiliser and other key inputs.
Vijay Chakravarthy, chief risk officer at Louis Dreyfus Company, one of the world’s largest agricultural trading houses, said expectations of a short-lived conflict had left investors underestimating the potential impact. “The market has not priced in a longer dislocation. Nobody is prepared for it,” he said, adding that even a further six months of disruption could have consequences for the 2027 crop cycle.
He also pointed to growing competition for other critical inputs such as sulphur, which is being diverted to higher-value industrial uses such as copper smelting, leaving fertiliser producers “at the back of the queue”.
Despite relatively ample global grain supplies, Chakravarthy warned that government responses could amplify the shock. Countries concerned about supply security may begin building up reserves, further tightening global availability and driving up prices, particularly for import-dependent economies. “Everyone feels their sovereignty is somehow compromised in the supply chain,” he said.
The blockade and its statistics
The blockade of the Strait of Hormuz, which began in late February 2026, has already dealt a serious blow to global agriculture, and experts agree that the world is “living on borrowed time” in the face of an impending food crisis.
Due to the rerouting of oil flows from the US to Asia, the Panama Canal has become congested. Oil tankers are outbidding bulk carriers for queue slots, leading to a 50–60 per cent increase in freight rates and waiting times of up to 40 days.
About 25–30 per cent of all international fertiliser trade (including urea, ammonia, phosphates and sulphur) passes through the Strait of Hormuz. In 2024, almost 18.5 million tonnes of urea alone were exported through the strait.
The main fertiliser exporters in the region — Saudi Arabia, Qatar, the UAE and Iran — are entirely dependent on cheap natural gas, which also transits the strait. As a result of the blockade, many plants have been forced to shut down or reduce production.
In addition to finished fertilisers, supplies of sulphur — a critical raw material for phosphate fertiliser production — have been disrupted. Almost 45 per cent of global sulphur supplies pass through Hormuz, creating shortages and driving up prices throughout the supply chain.
As a result of these disruptions, nitrogen fertiliser prices have soared:
- According to Purdue University (April 2026), nitrogen fertiliser prices have jumped more than 30 per cent, while Brent crude oil has exceeded $110 per barrel.
- According to Goldman Sachs (March 2026), nitrogen fertiliser prices have risen 40 per cent.
- According to FAO data (April 2026), Middle Eastern urea prices have risen 70 per cent compared with pre‑war levels.
Due to high prices, farmers around the world are already cutting back on fertiliser use, which directly reduces yields. According to estimates, a reduction in nitrogen fertiliser application of just 10–15 per cent could reduce corn yields by as much as 25 per cent.
The most vulnerable are countries in sub‑Saharan Africa and South Asia, where small farmers are particularly dependent on fertiliser availability. India, a major importer, buys about 6–8 per cent of its fertilisers from Gulf countries. In Australia, 27 per cent of vegetable producers have already cut production due to fertiliser shortages. An exception is China, which has built large strategic fertiliser reserves and frozen them for the domestic market.
