Deepanshu Mohan
For all the attention oil has received in this latest round of geopolitical stress, it was not the only market that moved with urgency. As tensions between Iran and the United States intensified and risks around the Strait of Hormuz escalated, fertilizer benchmarks began adjusting with unusual speed and clarity.
Within days, urea prices at major import hubs rose from roughly $516 to over $680 per tonne. Ammonia climbed from about $495 to $600, while phosphate prices crossed $700. These are not routine fluctuations. They signal a supply disruption that markets believe will persist, not dissipate.
The reason lies in geography. The Strait of Hormuz carries close to a quarter to a third of global fertilizer trade, alongside roughly 20 percent of global LNG flows that underpin nitrogen production. The Gulf region itself accounts for nearly 45 percent of global urea supply. Disruptions at this chokepoint have already constrained an estimated 22 million tonnes of annual urea exports, with ammonia and phosphate markets facing parallel dislocations. Nearly a million tonnes of cargo remain stranded, caught between contract and delivery.
For India, this poses an immediate constraint: more than 60 percent of its urea imports and close to 80 percent of ammonia and sulfur imports are sourced from the Gulf. India remains among the largest global importers of diammonium phosphate and urea, with imports of both rising sharply in recent months as domestic demand strengthens. When supply through this corridor tightens, substitution is limited and adjustment costs rise quickly.
Worse, the disruption has coincided with a narrow global application window, when farmers across major producing regions apply nitrogen to sustain crop cycles. When input prices rise sharply at this stage, usage adjusts. Application rates are reduced or cropping patterns shift toward less input-intensive alternatives. These decisions are not reversed easily, and their consequences appear with a lag in the form of lower yields.