Global food and fertilizer markets are facing a dual shock from a deepening military conflict in the Middle East and forecasts of a severe "Super El Niño" weather event, a combination that threatens to drive significant food price inflation in 2026. Urea prices have spiked more than 50 percent since the conflict began on February 28, disrupting a key global trade artery.
"I am more concerned about this Iran war than I was about the Ukraine conflict, because of the direct impact on nitrogen fertilizer production and availability," Dawid Heyl, co-portfolio manager for Ninety One's global natural resource strategy, said in a recent interview.
The conflict has brought shipping through the Strait of Hormuz, a conduit for about a third of the world's seaborne fertilizer, to a near standstill. The disruption removes roughly 1.5 million tonnes per month of urea from the Arab Gulf and 350,000 tonnes per month from Iran, forcing buyers to find alternative sources at sharply higher prices, according to an ICIS report. The supply crunch is compounded by production cuts in Algeria and drone-related disruptions to Russian output.
The convergence of the geopolitical supply shock with a severe climate event could create a crisis far greater than either event alone. The United Nations World Food Programme has warned that a prolonged conflict could push an additional 45 million people into acute hunger, while a "Super El Niño" could devastate agricultural yields in key regions from Australia to India.
Hormuz Ceasefire Fails to Calm Markets
A fragile two-week ceasefire between the US and Iran, which included a partial reopening of the Strait of Hormuz, has done little to ease market fears. Iran has reportedly begun charging a $2 million fee for passage, and the ceasefire's stability remains in doubt.
"A two-week ceasefire is not enough to change the bigger picture," said Deepika Thapliyal, a global fertilizer analyst with ICIS. "Even with the strait technically open, cargoes may face delays and elevated war risk insurance, so a full return to normal trade is likely to take weeks or even months, assuming the ceasefire stays intact." She noted that while urea prices may plateau, they are unlikely to decline in the short term.
'Super El Niño' Looms as Next Major Shock
As the fertilizer crisis unfolds, climate scientists are warning of a strengthening El Niño pattern in the Pacific Ocean. European climate models suggest a high probability of a "Super El Niño"—an event where sea surface temperatures are at least two degrees Celsius above the long-term average—forming between October and December 2026.
This weather phenomenon typically creates drought in some agricultural heartlands while bringing floods to others. "El Niño usually puts upward pressure on prices for cocoa, edible oils, rice, and sugar," said Chris Jaccarini, a senior analyst at an energy and climate think tank. He added that it poses a broader threat to tropical commodities like coffee and bananas, amplifying risk in a climate system already destabilized by human emissions. Paul Donovan, chief economist at UBS, wrote that in a Super El Niño scenario, "drought and limited water may be a bigger threat than nitrogen fertilizer shortages."
This article is for informational purposes only and does not constitute investment advice.
