Renewed military escalation between the US and Iran around the Strait of Hormuz is creating significant disruptions across global energy and agricultural markets. Oil prices, specifically Brent and WTI futures, surged by over 3% as fears mounted over sustained disruptions to critical export flows from the Gulf. This instability is leading to higher bunker fuel prices, directly impacting ocean freight rates, especially on long-haul routes connecting the Black Sea, Europe, and the Americas with Asian buyers. Shipping operators are reportedly incorporating war-risk premiums into their costs, with some tankers and bulkers choosing to wait outside the Gulf or reroute entirely, leading to longer transit times, increased insurance costs, and heightened timing risks for cargo deliveries.
The impact extends far beyond oil, with agricultural commodities facing substantial risks. While the Gulf region is not a primary agricultural producer, it serves as a crucial import and redistribution hub for essential goods like wheat, rice, barley, corn, and feed grains for GCC states and East African markets. Any prolonged delays in vessel arrivals or congestion due to naval controls and risk checks could tighten spot availabilities in these regions. Moreover, the renewed hostilities are affecting the supply chain for key bulk commodities such as grains, oilseeds, and sugar, which rely heavily on transit through Hormuz. Exporters using Gulf ports for bunkering or trans-shipment may also experience schedule disruptions and be forced to find alternative refueling points, further stretching voyage times.
A critical concern is the disruption to fertilizer supplies, especially for South American agricultural powerhouses like Brazil and Argentina, with their planting season approaching. The Persian Gulf accounts for roughly a third of global urea exports, and the flow of fertilizer ships into the region has significantly slowed since late June due to Iranian attacks on vessels. Pre-conflict, 20 to 40 fertilizer ships would typically load weekly, but this number has plummeted to around five. Senior agriculture analyst Alexis Maxwell noted that Brazil's urea imports were down 32% in the first half of 2026. This logistical challenge, driven by shipowner reluctance to transit the Strait of Hormuz due to heightened risks, is causing urea prices to rise and threatens food prices globally, particularly with forecasts of a powerful El Niño pattern adding to farmer anxieties.
Adding to the uncertainty, former President Trump's proposal to impose a 20% fee on cargo passing through the Strait of Hormuz, which could effectively add about $16 a barrel to oil shipped through the strait, signals an elevated risk of supply disruptions. This policy, combined with ongoing military escalations, undermines earlier expectations from the International Energy Agency that global oil markets would remain comfortably supplied. Vessel traffic through Hormuz has sharply declined, with Kpler data showing a 52% week-on-week decrease in confirmed crossings from July 10-12, reverting to more defensive routing patterns including increased use of Iranian and dark routes. War risk premiums for the Strait of Hormuz are expected to increase sharply, prompting shipowners and charterers to pause activities, exacerbating the logistical and financial strain on global commodity trade.
These escalating tensions have already led to a rebound in urea prices, with prices in New Orleans reaching a one-month high on July 10, rising 6.2% from the prior week – the largest jump in over three months. This reversal comes after prices had erased their wartime premium by mid-June when a ceasefire seemed imminent. The current situation highlights that despite early hopes for resolution, logistical and transportation challenges, alongside increased freight and marine insurance costs, remain the primary obstacles rather than production capacity. The overall effect is a significant increase in cost and risk across the entire global agricultural supply chain, with potential ripple effects on food prices worldwide.
