Concerns over a potential food crisis stemming from the recent conflict in Iran are diminishing as fertilizer markets demonstrate a significant recovery. The “war risk premium” that initially sent prices soaring has largely evaporated, with urea prices, a crucial crop nutrient, plunging over 30% since mid-April. This decline has subsequently pulled down prices of staple crops like corn and wheat, bringing the Bloomberg Agriculture Spot Index to its lowest level since March 5.
The initial phase of the conflict saw the effective closure of the Strait of Hormuz, a vital passageway for approximately one-third of globally traded urea supplies. This disruption caused urea prices to surge from around $400 per metric ton before the conflict to over $850 per metric ton in April 2026. However, by June, prices had fallen to roughly $453 per metric ton, near pre-conflict levels, due to the partial reopening of shipping lanes, China's resumption of urea exports (with a $660 per metric ton price floor), and a seasonal softening of demand as the Northern Hemisphere planting season concluded. Phosphate prices, while also rising, have been slower to recede.
Analysts note that the market is currently unwinding the initial risk premium. While the immediate shock was substantial, the improved supply situation, combined with generally favorable US crop conditions and ample global stockpiles, has mitigated earlier concerns about widespread shortages. The return of China to the export market and reduced demand from major buyers like Brazil have further contributed to the price decline. However, experts like Kang Wei Cheang from StoneX caution that while the immediate crisis has eased, the market remains sensitive to geopolitical tensions and elevated energy prices.
Looking ahead, market participants will be closely watching Brazil, where urea prices are expected to firm up in the second half of the year as buyers ramp up purchases. Additionally, the performance of farm-level fertilizer prices later in the year, as farmers secure supplies for the next growing season, will be critical. While a potential peace deal could stabilize prices, economists like David Ortega of Michigan State University emphasize that various inflationary pressures from the conflict and ongoing uncertainties mean it's too soon to declare the end of the story.
