The escalating Iran–Israel/U.S. conflict represents an unprecedented geopolitical shock in the Middle East, particularly with the disruption of transit through the Strait of Hormuz, a critical artery for global energy and fertilizer trade.

The implications for ammonia and urea markets were both immediate and far-reaching. Supply flows transiting the Strait of Hormuz (including Iran but excluding Oman) account for approximately 32% of global seaborne urea trade and around 30% of ammonia trade, underscoring the strategic importance of the region to global nitrogen markets.
Globally, the majority of ammonia production is captive and vertically integrated, primarily serving downstream urea production. Urea alone represents nearly 60% of total ammonia demand, amplifying the downstream impact of any ammonia supply disruption.

Soon after the onset of the conflict, multiple supply-side shocks have materialized. Iran halted ammonia and urea production, while Israel curtailed natural gas output at key facilities and suspended exports, directly impacting feedstock availability for regional producers, particularly in Egypt. Within days, QatarEnergy announced the shutdown of urea production (and likely ammonia), alongside liquefied natural gas (LNG) output, further tightening global supply conditions.

Impact on prices

The onset of the Middle East conflict had an immediate impact on markets and values. It is expected to continue exerting a significant impact on global ammonia and urea markets for the duration of the conflict. Downstream urea and nitrate prices rose by approximately 10–20% within the first week, with sharper increases observed in more liquid markets such as North Africa. Ammonia pricing has closely tracked urea price movements.

In response to escalating uncertainty, many suppliers outside the Middle East withdrew offers for both ammonia and urea, further tightening near-term availability. In Egypt, urea transactions accelerated at progressively higher price levels. Initial trades in the low-$500/mt FOB range were quickly followed by deals in the mid-$500s/mt FOB before continuing to rise another $200/mt over the next few weeks. In neighboring Algeria, transactions made similar gains with initial trades in the high-$500s/mt FOB before registering further increases.

The initial price movements represent an increase of approximately 20–25% compared to pre-conflict levels. Despite the sharp price escalation, total volumes remain relatively limited in the context of overall regional supply, particularly in Egypt. In part, this is due to the supply’s desire to reach higher levels, but in Egypt, there is uncertainty about the feedstock gas supply, which risks production shutdowns.
On the demand side, importers in CFR markets, especially in Europe, have been cautious and have sought to resist the rapid price increases. However, with global supply tightening significantly, buyers have few alternatives and are ultimately compelled to accept higher price levels.

Strait of Hormuz

The current disruption to transit through the Strait of Hormuz is without precedent in modern energy and fertilizer markets. Even in scenarios where the Strait is not fully closed, export volumes of urea and ammonia are expected to be minimal, as logistical and commercial barriers severely constrain flows. Freight rates have become largely irrelevant, given the absence of willing shipowners and insurers prepared to assume the elevated geopolitical risk.

By comparison, previous regional conflicts resulted primarily in partial disruptions rather than near-total dislocation. The most notable example was the Tanker War during the broader Iran–Iraq conflict in the 1980s, when vessel movements continued despite heightened risks. Importantly, attacks during that period were generally targeted at vessels associated with the warring nations, rather than disrupting shipping across the region as a whole.
In the current environment, the stakes are significantly higher. With the exception of Oman, virtually all Middle East ammonia and urea exports, including those from Iran, transit through the Strait of Hormuz, making it a critical chokepoint for global nitrogen supply. The effective disruption of this corridor has therefore created a severe constraint on global trade flows and supply availability.

On 3 March, U.S. President Donald Trump announced that the United States International Development Finance Corporation (DFC) would offer political risk insurance and financial guarantees to support maritime trade flows through the Gulf, particularly for energy shipments. However, detailed terms, including pricing and coverage scope, were not disclosed.
In parallel, the administration indicated that the United States Navy could begin escorting tankers through the Strait of Hormuz, if required. The practical feasibility of such measures was immediately unclear, including questions around operational scale, cost competitiveness, and what constitutes a “reasonable price” for risk coverage. Moreover, it was unclear whether shipowners would be willing to transit the region, even with insurance coverage and naval protection, given the heightened geopolitical risks.
In a more constructive scenario, the situation could resemble the Russo-Ukrainian War, where limited volumes of cargo continue to move under constrained and higher-risk conditions. Even in this case, flows would likely remain restricted in scale and subject to significant logistical friction. Uncertainty also persists regarding the scope of U.S. support—whether it will extend beyond energy cargoes to include chemical shipments such as ammonia and urea.

Importantly, shipping constraints represent only one dimension of the current disruption. Production outages across the Middle East, including in Iran and Qatar, have emerged as a primary limiting factor on global supply, compounding the impact of restricted maritime trade and intensifying pressure on global ammonia and urea markets.

Impact on Middle East supply

Oman is excluded from certain trade flow calculations, as its exports do not rely on transit through the Strait of Hormuz. However, the country has not been immune to broader regional instability and has experienced limited disruptions from infrastructure-related attacks, highlighting the widening impact of the conflict. Globally, the majority of ammonia production is captive, with output primarily consumed internally for downstream processing, most notably in the production of urea, which represents the dominant derivative.

Across the Gulf region, urea production is largely export-oriented, reflecting limited domestic demand relative to output capacity. The key exception is Iran, where a portion of urea production is allocated to the domestic market, with the remainder directed toward exports.

Red Sea

While global attention has centered on disruptions in the Strait of Hormuz, escalating risks in the Red Sea shipping corridor are adding a second layer of complexity to global trade flows. In Yemen, Houthi forces have resumed threats on commercial vessels, following the escalation of the latest regional conflict.

The group initially began targeting shipping in October 2023, before suspending operations in October 2025. During that period, several shipping companies diverted away from the Suez Canal/Red Sea route, opting instead for the longer and more costly Cape of Good Hope route around South Africa. Despite these disruptions, trade flows were not fully halted, and the Bab al-Mandab Strait remained open, allowing limited but continued vessel movement.

A similar pattern is likely to emerge under current conditions, with elevated freight rates, longer transit times, and increased logistical complexity for affected shipments, rather than a complete trade shutdown.

The Red Sea has also been discussed as a potential alternative export route for Saudi Arabian production. However, the feasibility of this option remains highly uncertain. Inland logistics infrastructure is not currently equipped to support large-scale product transfers from eastern production hubs to western Red Sea ports. Even if these logistical constraints were addressed, port capacity along the Red Sea is unlikely to accommodate the volume of material required to offset disruptions through the Strait of Hormuz.

Historically, Saudi production and export infrastructure have been concentrated along the eastern coast, and meaningful export volumes via Red Sea ports have been limited. As a result, the Red Sea is unlikely to serve as a viable large-scale alternative in the near term, reinforcing the vulnerability of global ammonia and urea supply chains to ongoing regional disruptions.

Comparison to the 12-Day War

In 2025, the same parties confronted each other in the 12-Day War, a conflict that shared some surface-level similarities with the current escalation but differed in several critical respects. During the 12-Day War, Iran threatened to close the Strait of Hormuz but ultimately did not do so. The military strikes also remained largely contained to Iran and Israel, without significant spillover into other countries across the region.
By contrast, the latest conflict has involved attacks on regional energy and logistics infrastructure. Iran has also effectively closed the Strait of Hormuz, with shipping through the waterway all but halted.
The main similarities between the two conflicts are largely confined to the swift disruption of key commodity production, namely ammonia and urea output in Iran and gas production in Israel.

Shutdowns – ammonia/urea and natural gas

As in the 12-Day War of 2025, Iran moved quickly to shut down its ammonia and urea plants immediately after the conflict began. Within days, QatarEnergy also halted gas production and downstream urea output, and likely ammonia production as well. With export routes disrupted, other regional producers are also expected to have curtailed operations, whether due to escalating war risk, storage constraints, or mounting supply pressure.

At the same time, Israel shut down its Leviathan natural gas field, suspending gas exports to Egypt.

With strikes continuing and export channels blocked, the risk of additional shutdowns at other regional production sites remains high.

Beyond the Middle East

During the 12-Day War, the shutdown of Israel’s gas field triggered widespread production disruptions in Egypt. Although Egypt has since taken steps to diversify supply and increase LNG imports, it still relies on Israeli natural gas to fully meet household and industrial demand.

One supportive factor for producers is that household natural gas demand is generally stable, with seasonal spikes mainly occurring during periods of extreme heat or cold. In addition, Egypt’s Prime Minister was quoted in local media as saying that gas supplies to factories would be maintained, with the country having secured sufficient energy and commodity needs for “several months.”

However, it remains uncertain whether disruptions to natural gas shipments from Israel and Qatar could undermine those plans and reduce the volume of gas available to industrial users. Even before the latest conflict, Egyptian ammonia and urea producers had been operating below capacity for extended periods due to gas supply constraints.
For now, production in Egypt has not been affected, but the near-term outlook remains uncertain. The relatively low volumes of urea being committed for export likely reflect producers’ reluctance to overcommit amid supply risk.

Egypt exports only limited volumes of ammonia, while remaining a major exporter of downstream urea. A substantial share of its production is also directed to the domestic market.

Beyond Egypt, European gas markets have also reacted sharply, with Dutch TTF natural gas prices surging over the past two days. Front-month prices rose above €60–65/MWh in intraday trading before settling at around €50/MWh, equivalent to roughly $17/MMBtu. This represents an increase of about €20/MWh, or $7/MMBtu, compared with pre-conflict levels.
European producers were already under pressure from relatively high feedstock costs. The latest price surge means producers will increasingly depend on downstream buyers accepting higher prices to maintain economically viable production.
Historically, European producers have been reluctant to shut down output immediately, instead adopting a wait-and-see approach while assessing both downstream pricing and feedstock cost movements. In past cases, this process has typically taken at least several weeks, and a similar timeframe is expected in the current market.

Summary and Outlook

For the duration of the conflict, ammonia and urea exports from the Middle East, including Iran, that would normally transit the Strait of Hormuz are likely to remain blocked. As a result, global fertilizer markets are facing an unprecedented supply shortfall.

Supply from Oman is likely to continue, as the country and its ports are located outside the Strait on its eastern side.

Production in both Europe and Egypt remains vulnerable due to their dependence on natural gas as a feedstock. Egypt may soon face severe gas shortages, forcing shutdowns at ammonia and urea facilities. In Europe, the surge in natural gas prices to levels last seen in 2022–2023 could trigger widespread outages across ammonia and downstream fertilizer plants, similar to those experienced during that period.

Prices are likely to rise in successive waves, with sharp spikes followed by temporary plateaus as traders first work through existing positions before returning to establish new ones. Should production also decline in Egypt and/or Europe, prices could approach the historic peaks seen in 2022.

Conversely, an abrupt end to the conflict would likely trigger an equally sharp price correction, even if supply has not yet been fully restored. This would reflect buyers delaying purchases in anticipation of recovering supply, while the trader’s willingness to support elevated FOB levels rapidly weakens.

The speed at which prices return to pre-war levels will depend on the extent of damage to production assets and logistics infrastructure, if any. Even under a more favorable scenario for buyers, a return to pre-conflict price levels would likely take at least one month after the conflict ends.