More expensive fertilizers mean more expensive food. Ceasefire in Iran crucial for agriculture

The longer the conflict in the Middle East lasts, the more severe its effects on the fertilizer market will be, say analysts at PKO Bank Polski. If it ended by May, it would not have to cause long-term market effects, they added.

The conflict in the Middle East has been going on since February 28, after the US and Israel attacked Iran. On the night from Tuesday to Wednesday, US President Donald Trump and the authorities in Tehran announced a two-week ceasefire, which is also to apply to Israel. Hours after announcing the ceasefire agreement with Iran, President Trump announced that the United States would help restore traffic in the Strait of Hormuz. Since Iran blocked the strait, traffic through this strategically important sea route for transporting oil has dropped by over 90%.

PKO Bank Polski analysts pointed out that the Persian Gulf countries are of key importance in the global supply chains of energy raw materials and some chemical products. “However, the largest share in international trade is not in crude oil or natural gas, but in fertilizers,” experts noted.

They emphasized that the blocked Strait of Hormuz is causing a whole cascade of negative consequences. “The lack of supplies of gas, ammonia, kerosene and other products (due to the blocked Strait of Hormuz) is already translating into production restrictions in fertilizer plants in other countries, mainly in Asia. Europe is less exposed to physical shortages, but is already experiencing higher prices for a number of products and their transport,” said the bank's representatives.

In their opinion, the longer the conflict, the more severe its effects on the fertilizer market and the longer the period of return to balance on global markets will be.

Analysts believe that a quick end to the conflict, by May 2026, will not have long-term market effects. “In such a scenario, farmers who did not manage to purchase fertilizers before the outbreak of the war would lose, and fertilizer distributors would benefit,” said PKO BP representatives.

In turn, in the scenario of a prolonged conflict, at least until the summer, they expect that fertilizer prices may continue to grow, even more than natural gas, and should ultimately translate into increases in the prices of agricultural produce. “It is possible that in such conditions, fertilizer prices will remain at levels higher than before the war for a year or even longer,” the analysts noted.

In their opinion, a long-term conflict scenario would favor fertilizer producers, mainly those benefiting from low gas prices, i.e. in the USA and Russia. “European producers would benefit from such a situation to a lesser extent due to lower production margins and a significant reduction in demand due to the decline in the profitability of agricultural production,” the analysts added. (PAP)

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