Tensions in Middle East threaten global agriculture

MIDDLE EAST – Escalating tensions between Iran and Israel are raising alarms across global agriculture markets as the Strait of Hormuz faces renewed threats of closure.

A new report by the American Farm Bureau Federation warns that disruptions in the waterway could drive up fuel and fertilizer costs for farmers and ranchers.

Iran’s parliament voted on June 22 to shut the waterway after U.S. and Israeli military strikes, a decision that underscored the Strait’s role as one of the most critical shipping routes in the world.

“The Strait of Hormuz carries about 20 percent of the world’s petroleum,” said an analyst at the U.S. Energy Information Administration. “Any disruption has an almost immediate effect on global prices.”

At just 21 miles wide, the strait serves as a key channel linking the Persian Gulf to the Arabian Sea. About 15 million barrels of oil flow through it daily, most of it destined for China, India, Japan and South Korea.

When clashes intensified in May and June, Brent crude prices surged nearly 20 percent before easing once a ceasefire was announced.

Fuel and fertilizer markets reacted quickly to the unrest. Diesel drives nearly every stage of U.S. crop production, from planting to harvesting and transport.

Natural gas is the main ingredient for nitrogen fertilizer, making energy costs a central concern for producers.

The Department of Agriculture projects farmers will spend more than $22 billion on energy-related inputs in 2025, about 5 percent of total production costs. Even modest increases in prices can erode already thin margins.

“Farmers already deal with unpredictable weather and market swings,” said an Iowa corn grower. “When fuel and fertilizer costs jump overnight, it feels like the ground shifts under your feet.”

In 2019, tanker attacks in the Gulf of Oman triggered a sharp spike in oil markets. Analysts warn a similar scenario could unfold if current tensions escalate.

Fertilizer trade at risk

The Strait of Hormuz also supports fertilizer exports. Qatar, Saudi Arabia and Iran ranked among the top global nitrogen suppliers in 2024, accounting for about a quarter of worldwide exports.

Including Egypt and Bahrain, the broader region provided more than one-third of global nitrogen shipments valued at US$2.6 billion.

The United States imports about 25 percent of its fertilizer needs. Saudi Arabia supplied nearly 40 percent of U.S. phosphate imports in 2024, while Israel, Egypt and Jordan added another 25 percent combined. Qatar and Saudi Arabia also contributed 16 percent of U.S. urea imports.

“Even when the U.S. is not buying directly from Hormuz suppliers, global shortages push prices up for everyone,” said a strategist with an agricultural cooperative.

U.S. Gulf urea futures climbed about 7 percent in June, while liquid nitrogen products rose nearly 10 percent, reflecting market concerns. Past disruptions show how quickly prices can spike.

In 2022, nitrogen costs surged by more than 150 percent compared to 2020 due to supply shocks tied to Russia’s invasion of Ukraine and natural gas constraints.

U.S. exporters on alert

The Gulf also imports American farm products. U.S. agricultural exports to the region totaled $3.7 billion in 2024, led by almonds, pistachios, walnuts, dairy, cotton and rice.

Saudi Arabia and the United Arab Emirates each bought about $1.4 billion. Iraq followed with $265 million.

Exporters now face the prospect of higher freight costs and insurance premiums. While some Gulf buyers can reroute shipments through Saudi Arabia or the Red Sea, longer transport increases expenses.

If tensions worsen, some buyers may switch to European, Australian or Central Asian suppliers.

For now, ports remain operational, and flows have not yet been disrupted. Still, uncertainty weighs heavily on producers. As one farmer summed it up: “We don’t sell much directly to the Middle East, but when Hormuz shakes, the whole world feels it.”

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