A rapid and severe disruption in maritime flows through the Strait of Hormuz is emerging as a major shock to global agrifood systems, with tanker traffic reportedly dropping by more than 90 percent. The situation is driving up fertilizer costs and threatening agricultural production worldwide, according to warnings from the Food and Agriculture Organization (FAO). The impact extends beyond energy markets, directly affecting input availability and food security.
Máximo Torero, Chief Economist at the FAO
Máximo Torero, Chief Economist at the FAO, said the ongoing disruption is triggering one of the most significant commodity flow shocks in recent years. Speaking at a United Nations briefing, he stressed that the Strait of Hormuz is a critical artery not only for crude oil and LNG but also for globally traded agricultural inputs, particularly fertilizers.
The Strait typically handles around 20 million barrels of oil per day, equivalent to roughly 35 percent of global crude flows, along with one-fifth of global LNG trade and up to 30 percent of internationally traded fertilizers. Torero emphasized that the current disruption is therefore not limited to energy markets, but represents a systemic shock affecting agrifood supply chains.
INSURANCE COSTS SURGE
Compounding the situation, war-risk insurance premiums have surged sharply following the expansion of high-risk zones. Premiums reportedly increased from 0.25 percent to as high as 10 percent of vessel value, with coverage periods shortening to weekly renewals. These conditions are expected to prolong logistical bottlenecks even if tensions ease in the near term.
FERTILIZER COST SHOCK DEEPENS
Fertilizer markets are already reflecting the strain. Prices for key products have risen, with Middle East granular urea increasing by 19 percent and Egyptian urea surging by 28 percent in early March. Given that natural gas is a primary input for nitrogen fertilizer production, elevated energy costs are further reinforcing upward price pressure. FAO projections suggest global fertilizer prices could average 15 to 20 percent higher in the first half of 2026 if disruptions persist.
Torero highlighted that farmers are facing a dual cost burden, with both fertilizer and fuel prices rising simultaneously. This combination affects not only crop cultivation but also irrigation, transport, and broader agricultural operations. In response, producers may reduce fertilizer application rates or shift toward less input-intensive crops, a trend that could have yield implications due to the nonlinear response of crops to fertilizer use.
IF DISRUPTIONS EXCEED THREE MONTHS, PLANTING DECISIONS WILL BE AFFECTED
The duration of the disruption will play a decisive role in determining its global impact. Short-term interruptions of up to one month may be manageable, with global food stocks currently considered sufficient to stabilize markets within a few months. However, a prolonged disruption extending beyond three months could significantly alter planting decisions for 2026 and beyond, particularly for fertilizer-intensive crops such as wheat, rice, and maize.
Torero also pointed to potential secondary effects, including shifts toward nitrogen-fixing crops like soybeans, increased competition from biofuel demand as higher oil prices incentivize agricultural feedstocks, and broader market volatility. The FAO Food Price Index remains about 21 percent below its March 2022 peak, but sustained disruptions could reverse this trend.