Key Takeaways: Australia extended its domestic fuel reserve release as the Iran war continues to disrupt global energy supplies. The Strait of Hormuz closure has pushed diesel prices above $5.70 a gallon in parts of the U.S. and raised fertilizer costs by as much as 45 percent. The IMF, World Bank, IEA and WTO jointly warned the conflict is straining energy supplies and hitting vulnerable economies hardest.
Australia extended a measure releasing petrol and diesel from domestic reserves as the Iran war continues to disrupt global energy supplies, with the Strait of Hormuz closure straining fuel markets from Asia to the American Midwest.
Australia on Saturday extended the emergency fuel release, Energy Minister Chris Bowen said, as the country grapples with the impact of the Iran conflict on energy supplies. The decision follows warnings from the International Energy Agency, International Monetary Fund, World Bank and World Trade Organization that the war is disproportionately affecting poorer countries through higher fuel and fertilizer prices.
"The combination of multiple major intersections, access points to adjacent businesses, high seasonal traffic volumes and limited sightlines has resulted in ongoing and well-documented safety concerns," the global institutions said in a joint statement, warning that continued disruption of shipping flows through the Strait of Hormuz — a key route for oil and gas shipments — presents increasing risks for fuel security ahead of peak summer demand in the Northern Hemisphere.
The Strait of Hormuz carries about one-fifth of the world's oil and natural gas. Its closure has pushed diesel prices above $5.70 a gallon in parts of the U.S. Midwest, according to AAA data, while fertilizer costs have spiked as much as 45 percent, per the American Farm Bureau Federation. Missouri row crop economist Ben Brown of the University of Missouri Extension said most farmers had secured the majority of their fertilizer needs before the conflict began, but warned that "about 15 percent of our fertilizer needs still left from the row crop space" faces higher costs.
The disruption is rippling beyond fuel. Italy's government under Prime Minister Giorgia Meloni has signaled it will reduce its planned draw on the European Union's SAFE defense loan facility from 14.9 billion euros to between four billion and five billion euros, with Meloni telling Mattino Cinque that "we cannot tell citizens that there is money only for defense" while energy prices surge. The EU's executive vice president Raffaele Fitto has proposed reallocating existing European funds to combat high energy prices and secure fertilizer supplies.
In the U.S., the conflict has exposed vulnerabilities in the fertilizer supply chain. The U.S. produces about 60 percent of its own phosphate fertilizer needs but imports a significant portion from Saudi Arabia, according to Veronica Nigh, senior economist at The Fertilizer Institute. "We have significant exposure from the Middle East," Nigh said during an April seminar, though she noted that phosphate imports tend to arrive earlier in the year, meaning much of that product was already in place before the Strait closure.
The American Farm Bureau Federation's April Fertilizer Availability Survey of more than 5,700 farmers found that 67 percent of Midwestern commodity farmers had made fertilizer purchases ahead of planting season — more than twice the rate of any other region. Still, Brady Holst, vice chairman of the Illinois Soybean Association, warned that farmers typically buy fertilizer for the fall ahead of time, and "even if the conflict ended today, the price for fall fertilizer would still be elevated."
Diesel prices in the U.S. have exceeded levels seen during the Russia-Ukraine conflict, Brown noted, driven by a combination of the Middle East crisis and domestic refinery issues. "Any time we see higher oil prices, it increases the cost from farm gate to retail," he said. "So much of the food dollar now comes from that part of the equation."
The World Bank has warned the conflict could threaten food security worldwide. With the Northern Hemisphere summer driving season approaching and global oil inventories depleting rapidly, the joint statement from the four international institutions said continued disruption "would present increasing risks for fuel security, market conditions, and broader economic resilience."
This article is for informational purposes only and does not constitute investment advice.
