Crop prices have climbed to a three-year high, signaling that significant downstream cost increases are likely to reach supermarket shelves in the near future. Two primary forces are driving the surge in crop prices and the risk of a broader global food crisis: intensifying conflict in the Black Sea region coupled with heat waves that threaten global grain trade flows, and acute volatility in fertilizer markets triggered by the war in Iran and the closure of the Strait of Hormuz.

The Strait of Hormuz is one of the world's most critical maritime chokepoints, through which roughly one-fifth of global oil consumption normally transits. Its closure has reverberated well beyond energy markets, severing a vital export route for the Middle East's large fertilizer industry. The region's fertilizer production capacity is built on its abundant natural gas reserves, which are used to manufacture ammonia—a primary feedstock for nitrogen fertilizers such as urea.

The International Food Policy Research Institute (IFPRI) has characterized the deteriorating situation in fertilizer supply chains as an "input crisis" that could escalate into a full-scale food crisis, disproportionately affecting poorer nations. Because synthetic fertilizer is derived from petroleum, markets for fertilizers and key components such as urea and phosphate are highly sensitive to oil price shocks and supply disruptions. Fertilizer typically accounts for a substantial share—often 15 to 20 percent—of total operating costs for major grain crops like corn and wheat, meaning that sustained increases in fertilizer prices feed directly into higher food production costs.

Roughly one-third of global urea imports originate from the Middle East. Since the Strait of Hormuz was closed to shipping traffic earlier this year, an estimated 3.9 million tonnes of urea exports—approximately 30 percent of the region's annual fertilizer exports—have been effectively blockaded.

Fertilizer prices spiked in the months following the initial closure of the Strait at the end of February before stabilizing somewhat. However, prolonged conflict in the region now threatens to generate sustained market volatility as production facilities scale back output and stored inventories face degradation risks.

"Most production facilities in the region continue to operate at reduced rates to prevent excessive stockpiling," IFPRI reports. "While urea can generally be stored for several months, high temperatures and moisture can damage its quality. The risk of substantial fertilizer supply shortages is rising as the conflict prolongs and the Strait of Hormuz stays closed."

The current disruption follows a period of significant fertilizer market instability. Global fertilizer prices surged to record highs in 2022 following Russia's invasion of Ukraine, as Russia is one of the world's largest fertilizer exporters and a major producer of natural gas. Although prices had eased from those peaks, the Hormuz closure has renewed upward pressure on markets that had not fully returned to pre-2022 levels.

Beyond the supply chain disruptions in the Middle East, Ukrainian ports along the Black Sea have become sites of renewed military conflict, causing significant disruptions to staple grain supply chains. Ukraine's exports of corn, barley, wheat, and meslin have remained well below their 2020 levels—prior to Russia's invasion—and this persistent deficit has had a substantial and ongoing impact on global food security, given Ukraine's role as a major agricultural exporter.

A newly published United Nations report warns that the compounding effects of rising energy and fertilizer prices—driven by global conflicts including the United States and Israel's war in Iran as well as Russia's continuing war in Ukraine—could push an additional 9 to 18 million people into hunger worldwide. The report found that the global average cost of a healthy diet has risen by nearly 25 percent between 2021 and the present, increasing from 3.44 purchasing power parity (PPP) dollars per person per day to 4.28 PPP. Latin America and the Caribbean face the highest average costs, at 4.91 PPP.

The latest oil and fertilizer shock stemming from the Strait of Hormuz closure has struck markets during an already vulnerable period, as they continue to grapple with the fallout from Russia's war in Ukraine and escalating pressure from climate change.

"We are in a current era where we have the highest number of conflicts and are still increasing," International Fund for Agricultural Development (IFAD) President Alvaro Lario told the Associated Press earlier this month, adding that "Whenever there is a conflict, also hunger, displacement and refugees increase."

Addressing the crisis will demand sustained effort amid unprecedented global uncertainty. "Ending hunger and making healthy diets affordable requires political commitment, sustained investment and enabling policies," QU Dongyu, Director-General of the United Nations Food and Agriculture Organization, was quoted by EuroNews.

"Recent crises—from natural disasters like the COVID-19 pandemic to man-made disaster like hotspots of conflicts, the war in Ukraine, the Gaza crisis, and the recent Strait of Hormuz disruption—have demonstrated both the resilience of agrifood systems and the need to strengthen them further to better serve the world's most vulnerable people, farmers and consumers," Dongyu added.