Beyond oil: Hormuz closure puts Russia in the lead in the fertilizer market

Despite U.S. President Donald Trump’s frequent statements that victory in Iran is close, there is no end in sight to the hostilities in the Persian Gulf. On the contrary, new approaches to limited traffic through the Strait of Hormuz are gradually being implemented. The Islamic Revolutionary Guard Corps has started issuing paid transit permits to vessels unaligned with the United States or Israel, and a growing number of countries want to discuss “safe passage of their vessels.”

The consequences of restricted transit for the oil market are already clear and well known. Not as much attention is being paid to the impact on the global fertilizer market. The changes there will be more gradual, but irreversible. Food prices will take six to nine months to react to the supply shock in the fertilizer market resulting from the closure of the Strait of Hormuz. Meanwhile, Russia might enjoy more lasting benefits than temporarily lining its pockets with petrodollars.

The Strait of Hormuz is the most important transit route not just for oil but also for fertilizers. Persian Gulf countries account for about 46 percent of global seaborne urea transit and around 30 percent of ammonia transit. These nitrogen compounds are integral for efficient cultivation of almost every food crop. However, their shipping from the Persian Gulf is almost completely paralyzed.

Read more at Carnegie Endowment for International Peace