Global fertiliser and ammonia markets are bracing for intense pressure following the effective closure of the Strait of Hormuz, as diplomatic negotiations between the US and Iran remain deadlocked.
According to Rystad Energy’s trade mapping, a potential closure could impact the trade of 15% of the world’s ammonia and 21% of urea, a type of high-nitrogen fertiliser.
The primary producers are Saudi Arabia and Qatar, with Kuwait, Bahrain, the UAE, Iran, and Iraq also included.
The ongoing logistics disruption is projected to severely impact the already struggling ammonia and urea markets, according to the Rystad Energy analysis.
This shock is highly likely to rapidly extend into the food and agricultural supply chains, initially affecting the nations most dependent on these specific trade routes.
Downstream risks
The message for both policymakers and consumers regarding energy and food security is unmistakable: the trade of over a fifth of urea by Middle East exporters directly impacts agricultural production and farming, Minh Khoi Le, senior vice president and global head of hydrogen at Rystad, said in the analysis.
India is the most vulnerable, as it procures approximately 6% to 8% of its fertiliser from these Gulf nations.
“The strait’s closure can translate into real downstream risk quickly, including possible food shortages, manufacturing disruptions, compromised water integrity, and other significant global challenges, depending on the length of the war,” Khoi Le said.
Several nations, primarily in the Asia Pacific region—including South Korea, Thailand, and Australia—are reliant on fertiliser imported through the strait.
The Americas, specifically the US and Brazil, also depend on urea from this trade route.
The disruption will also affect secondary markets that receive re-exports from these key importing countries, according to Rystad.
Major importers, notably India and South Korea, will be compelled to secure alternative sources to meet their ammonia requirements.
“While producers with assets in other countries can ramp up fertiliser production, they are often in regions where the cost of production is much higher, such as in Europe, leading to higher food costs and potential inflation risks,” the Norway-based energy intelligence agency said.
E-Ammonia: alternative solutions
However, recent green and electrolytic ammonia development can offer a possible solution, especially in the context of supply security, by detaching dependency of nitrogen fertilizers on fossil fuels.
E-ammonia, or ammonia produced using only renewable energy, was proposed as a solution to Europe’s energy needs following Russia’s invasion of Ukraine, mirroring a common geopolitical response, but saw limited success.
This alternative is now being explored in China, though its potential to replace or significantly displace traditional fertiliser is uncertain.
E-ammonia generally carries higher costs, but recent Indian tenders have shown prices approaching parity with conventional ammonia.
The market is also seeing new offtake agreements emerge this year, such as the deal between Uniper and AM Green for Indian-produced e-ammonia destined for Europe, and Yara’s agreements with ATOME in Uruguay.
No immediate relief and supply timeline
However, because these contracted volumes are not anticipated to become available until around 2030, any immediate relief from supply constraints is unlikely, the agency said.
The global ammonia trade saw a decline in 2025, falling to approximately 10.9 million tonnes per annum (Mtpa) from 12.3 Mtpa in 2024, according to Rystad.
Around 15% of this could be impacted by a prolonged closure of the Strait – mainly from Saudi Arabia, which would be impacted as most of the supply and trade is occurring on its east coast, the agency added.
Additionally, if there are disruptions to fertiliser supplies in the agriculture sector, Rystad predicts a decline in total global food crop production.
India’s reliance on Middle Eastern countries for fertiliser products is particularly evident in the urea market.
In 2025, global urea trade was approximately 50.8 Mtpa. Significantly, about 10.6 Mtpa of this total originates from key affected nations, primarily Saudi Arabia, Qatar, and the UAE.
India imported 2.2 Mtpa of this volume, underscoring its dependency.
Other countries, including Thailand, Australia, Brazil, and the US, also currently import considerable amounts of urea from this region.
The Strait of Hormuz event is not unique to the fertiliser industry, as other trade routes have faced pressure in recent years.
Although Russia’s volume has decreased significantly since its invasion of Ukraine, it still plays an important role in the 2025 fertiliser trade, accounting for about 5% of the global ammonia trade and 15% of urea exports.
“The recent events in the Middle East add another layer of risk to an already strained ammonia and fertiliser trading landscape, underscoring how concentrated these flows are through a small set of suppliers and chokepoints,” Rystad said.
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