Indian kharif sowing, fertilizer prices, Iran war impact, urea shortage, El Nino drought
Iran War Impact Disrupts Global Fertilizer Supply Chains
The US-Iran conflict, which escalated on Feb 28 with Israeli support, has sent shockwaves through global commodity markets at a particularly damaging time for agricultural planning cycles. Tanker traffic through the Strait of Hormuz has plunged by 92 per cent since hostilities began, effectively shutting down one of the world's most critical shipping lanes.
Iran, a major urea exporter, has seen its crude oil refineries brought to a complete halt. The country has threatened to block all vessel movement through the Strait, even as the US and France have offered to escort commercial ships through the waterway.
Wider Gulf Disruptions Compound the Crisis
The conflict's fallout extends well beyond Iranian borders. Qatar has been forced to shut its liquefied natural gas terminals after drone strikes, with analysts estimating weeks before operations can resume. Saudi Arabia, one of the world's leading producers of phosphate, has also seen its export capacity compromised.
These three disruptions, covering urea, phosphate, and LNG, together threaten the entire fertilizer supply chain that India and other major agricultural economies depend on.
Fertilizer Prices Surge to Multi-Year Highs
Urea prices have shot up by over 12 per cent in less than a week, reaching $850 a tonne. Market participants fear the benchmark could breach $1,000 a tonne if shipping disruptions persist. Di-ammonium phosphate prices have already touched the $1,000 mark.
North America and Australia are already feeling the strain, as both regions require urea for spring and winter planting cycles respectively. However, the most consequential demand window lies ahead: India's kharif sowing, which begins in June.
Urea Shortage Risk for India's June Planting
The Indian government has not yet issued any public statement on fertilizer availability for the upcoming kharif season. This silence has added to market anxiety.
India faces a dual threat. First, elevated fertilizer prices at the time of sowing could reduce utilisation rates among farmers, directly impacting crop productivity. Second, if the conflict extends beyond a month, as US President Donald Trump has indicated, the country could face outright shortages of key crop inputs during its most critical planting window.
El Nino Drought Forecasts Add a Second Layer of Risk
The supply disruption coincides with deteriorating weather outlooks. Multiple global weather agencies have flagged a rising probability of El Nino conditions developing through the Indian monsoon season.
El Nino typically brings prolonged dry spells and below-average rainfall to the Indian subcontinent. Under drought conditions, farmers tend to increase fertilizer application to compensate for moisture stress in crops, which would amplify demand precisely when supplies are constrained.
Indian Kharif Sowing Season Under Dual Pressure
The convergence of a fertilizer supply crisis and an adverse monsoon forecast positions the 2025 kharif season as one of the most challenging in recent years. Crop productivity across rice, pulses, oilseeds, and coarse cereals could all be affected if either variable worsens.
A swift resolution to the Iran conflict could ease pressure on fertilizer prices and restore shipping through the Strait of Hormuz. However, the longer hostilities persist, the deeper the impact on India's agricultural supply chain will be.
Outlook: Resolution Timeline Is Key
The trajectory of the kharif season now hinges largely on geopolitical developments in the Persian Gulf. A ceasefire or de-escalation within weeks could allow fertilizer shipments to resume and prices to stabilise ahead of June.
Without that, India faces the prospect of elevated input costs, potential shortages, and a weather-stressed growing season converging simultaneously. Policymakers in New Delhi will need to act decisively on procurement and subsidy mechanisms to shield farmers from the worst-case scenario.