The escalation of the conflict between the US-Israel and Iran that is affecting the Strait of Hormuz region, in the Middle East, is increasingly reflected in fertiliser markets, and highlights the links between disruptions in energy and shipping and impacts on agricultural markets, future food supply and trade.

Historical patterns show that increases in energy prices are typically followed by higher fertiliser prices. Persistently high fertiliser costs can, in turn, affect food supply, particularly when inputs become less affordable for producers, says UN Trade and Development (Unctad).

Higher fertiliser costs influence planting decisions, including crop choice and total area planted, and also affect input use and yields, the impacts of which will materialise over time.

For developing economies, these effects are compounded by existing structural constraints. Many face high debt burdens, limited fiscal space and rising borrowing costs.

In this context, higher prices for energy, fertilisers and transport place additional strain on public finances and household budgets. These challenges are further intensified by limited access to finance, which reduces producers’ ability to absorb rising costs.

Since the escalation of the conflict, oil prices have surged sharply, while natural gas prices have risen steeply across both Europe and Asia, with prices having roughly doubled in Asia, with Europe seeing similarly sharp increases.

This matters for fertilisers because natural gas is a key input in the production of nitrogen-based fertilisers, such as urea and ammonia. As gas prices rise, fertiliser production costs increase, which pushes up prices.

The effects are already visible. Prices for nitrogen-based fertilisers have risen significantly, with smaller but noticeable increases in phosphatic fertilisers, Unctad says in its 'From gas to grain: Fertilizer disruptions raise risks for food security and trade' report.

The Strait of Hormuz region is also a major producer of key inputs such as sulphur, used in phosphatic fertilisers, and is a central hub for global fertiliser trade. About one-third of global seaborne fertiliser volumes pass through the strait.

For major importing countries, particularly in Asia, disruptions to energy and fertiliser flows are closely linked. Reduced access to natural gas and higher costs can directly affect fertiliser production, availability and trade, the agency notes.

Fertiliser trade is also highly concentrated, which increases exposure to disruption. Countries in the Strait of Hormuz region account for 13% of global exports of nitrogen and 9% of phosphate fertiliser nutrients.

Disruptions to both fertiliser inputs and trade flows are already pushing prices higher, particularly for nitrogen-based fertilisers, with more moderate increases in phosphatic products, Unctad states.

Major agricultural produce exporters, from Brazil to India, rely on fertiliser imports, thereby linking input markets directly to global food supply. In many developing countries, fertiliser access is equally critical for staple food production.

Dependence on supplies from the Gulf is significant, including in countries such as Sudan, Tanzania and Somalia, it says.

Additionally, this reliance coincides with limited capacity to absorb price increases or secure alternative supplies.

Many import-dependent economies face tight fiscal space, external imbalances and constrained access to finance, reducing their ability to respond to rising costs.

While food insecurity is often associated with food imports, it is also closely tied to access to essential agricultural inputs. Disruptions to fertiliser supply therefore risk affecting production, yields and food availability, Unctad says.

Similarly, higher transport and insurance costs are feeding through to fertiliser prices and, in turn, to agricultural production and exports.

Energy, fertilisers and food are closely linked through production and trade, meaning constraints in one area can quickly affect others, with implications for food security, trade and development outcomes.

The scale of these effects will depend on how long disruptions persist. Current trends point to increasing pressure across commodity markets and supply chains, says Unctad.