Ammonia Supply Crisis Builds Bearish Pressure With 23% of Global Trade Halted

Strait of Hormuz Closure Severs a Critical Supply Artery

Ammonia supply crisis conditions emerged almost immediately after the United States and Israel launched Operation Epic Fury against Iran on February 28, 2026. Iran's subsequent closure of the Strait of Hormuz to unfriendly nations cut off the single most important maritime corridor for nitrogen fertilizer exports.

The Persian Gulf region accounts for roughly 20 to 30% of global ammonia exports and up to 35% of seaborne urea trade, according to the International Energy Agency. As of early May, the strait has been effectively closed for more than 69 days, following a failed brief reopening attempt on April 21 to 22 that collapsed within 24 hours.

Gulf state exports from Saudi Arabia, Qatar, Iran, Bahrain, and the UAE fell by approximately 300,000 tonnes per month in March and April compared to normal volumes, according to Argus Media senior analyst Jake Preston. A conditional ceasefire mediated by Pakistan was reached on April 8, but shipping through the waterway remains at near-zero levels.

Fertilizer Price Surge Outpaces the 2022 Shock

The market response has been swift and severe. Urea prices climbed more than 28% within the first three weeks of the conflict, a faster escalation than during the early months of the Russia-Ukraine war, according to researchers at the University of Illinois.

Argus Media last assessed delivered ammonia prices into India at a midpoint of $850/t cfr in late April. Sellers have encountered resistance from buyers above this level, as downstream markets cannot absorb the elevated raw material costs. However, an Indian importer that issued a tender for 8,000 tonnes of spot ammonia received offers close to $1,000/t cfr, which it rejected as unviable.

Diammonium phosphate (DAP) and monoammonium phosphate (MAP) prices have risen by less than 3% so far, indicating the disruption remains concentrated in nitrogen products. But analysts at the University of Illinois warn that the full effects on phosphate markets may still be unfolding, as historical experience from the 2022 crisis shows fertilizer prices often continue rising for several months after the initial shock.

India Ammonia Imports Face an Unprecedented Shortfall

India stands as the most exposed major economy in this crisis. The country sources over 80% of its ammonia imports from the Middle East, primarily from Saudi Arabia and Oman, according to the ICIS Supply and Demand Database. Those flows have stopped entirely since the strait was effectively shut.

The disruption extends beyond direct ammonia imports. Qatar Energy declared force majeure on its LNG exports on March 4, citing unsafe passage. Since India's ammonia sector consumed approximately 17 million tonnes of imported LNG in the April 2025 to January 2026 period, most of it under long-term Qatari contracts, the loss of gas feedstock threatens domestic ammonia production as well.

India's government issued an emergency order guaranteeing the fertilizer sector a monthly gas supply based on 70% of its average consumption. However, ICIS projects that India will secure only one or two LNG spot cargoes per month during the current financial year, which translates to a widening supply deficit.

India's fertilizer ministry has recommended that national fertilizer companies shift to consortium-based procurement, aggregating demand to secure competitive pricing. The timing is critical. The Kharif sowing season begins in June, and ammonia is the essential feedstock for producing DAP, a critical input for rice, corn, chickpea, and lentil cultivation.

Compounding Supply Losses West of Suez

The Hormuz disruption has collided with a pre-existing supply gap from the Western Hemisphere. Nutrien, the world's third-largest nitrogen producer, commenced a controlled shutdown of its four ammonia production facilities in Trinidad and Tobago in October 2025.

The shutdown followed port access restrictions imposed by Trinidad and Tobago's National Energy Corporation and a protracted dispute over natural gas pricing and $28 million in retroactive port fees. Nutrien's Trinidad operations had contributed approximately 85,000 tonnes of ammonia and 55,000 tonnes of urea to monthly sales volumes.

As of February 2026, Nutrien has dropped Trinidad volumes from its annual sales forecast and confirmed that no viable economic path to restart has been identified. Trinidad is the second-largest exporter of ammonia to the United States after Canada, and the loss of its output has removed an estimated 100,000 to 150,000 tonnes per month from seasonal averages.

The combined effect of the Hormuz closure and the Trinidad shutdown has taken roughly two million tonnes of annualized ammonia capacity offline, creating what Preston described as a market balance that has shifted "severely into deficit" east of the Suez.

New U.S. Capacity Offers Partial Relief

Two newly commissioned world-scale ammonia plants in Texas provide a counterweight, though their output cannot fully close the gap. The Gulf Coast Ammonia facility in Texas City and Woodside Energy's plant in Beaumont will eventually contribute up to two million tonnes per year in export capacity.

These facilities had been expected to swing the global market into oversupply and produce bearish pricing in the first half of 2026. The war in Iran upended that outlook entirely.

Buyers west of the Suez now have more supply options as American domestic demand begins to ebb with the close of application season. European producers are also running at high utilization rates, as elevated ammonia prices more than offset rising natural gas costs. But these sources offer limited relief for the markets that matter most: India, Southeast Asia, and East Africa, where supply chains are structurally oriented toward Gulf exports.

Global Food Security Hangs in the Balance

The Food and Agriculture Organization has warned that the disruption carries severe downstream consequences for agricultural production. Unlike oil, the fertilizer sector does not maintain internationally coordinated strategic reserves. No equivalent of the IEA's coordinated petroleum drawdown mechanism exists for ammonia or urea.

The Carnegie Endowment for International Peace has noted that fertilizer producers in India, Bangladesh, and Pakistan have been forced to curtail or shut down production due to lost LNG and ammonia feedstock from the Gulf. Chemical producer Balaji Amines temporarily shut down plants in mid-March due to ammonia shortages.

The FAO estimates that up to 30% of globally traded fertilizer products, roughly 16 million tonnes per year of nitrogen, phosphate, and sulfur combined, normally transit the Strait of Hormuz. For countries already contending with tight agricultural budgets, the price impact could be devastating. Kenya imports approximately 40% of its fertilizer from the Gulf and depends on imports for 90% of its wheat supply.

The World Economic Forum has characterized the crisis as a structural shift toward resilience and diversification, noting that wealthier nations may outbid competitors in commodity markets while the most vulnerable populations will simply go without.

Ammonia Supply Crisis Outlook Through Year-End

Analysts are broadly aligned in their expectation that ammonia markets will remain tight and prices will stay above historical averages through the end of 2026, even under optimistic de-escalation scenarios.

Preston of Argus Media assumes that Middle East volumes will begin to flow by the end of May, picking up through June and July. But he cautioned that if the strait remains closed beyond the next month, the consequences for global markets would be extensive.

Three factors will determine the trajectory of this crisis. The first is whether Gulf shipping resumes at meaningful scale following the fragile ceasefire. The second is whether the new U.S. Gulf Coast capacity ramps up quickly enough to offset losses from the Middle East and Trinidad. The third is whether Nutrien and the Trinidad government resolve their standoff, which would revive a critical supply source for markets west of Suez.

Even if all three developments materialize in the near term, the global pipeline will take months to refill. Freight and insurance costs for chemical shipments through Middle Eastern waters have doubled at times during the crisis, and shipping companies remain wary of returning even under a ceasefire framework. India's Kharif season will test whether existing inventories, reported to be 36.5% above year-ago levels in March, can absorb the shortfall until new supply arrives.

The ammonia supply crisis of 2026 has exposed a fundamental vulnerability in the global food system: the concentration of nitrogen fertilizer production in a geopolitically fragile corridor with no backup reserves. Whether that lesson translates into structural change or fades once shipping resumes remains an open question.