What Does the Iran Conflict Mean Beyond Higher Oil Prices?

The Farm Office Team is pleased to share this guest blog by Dr. Ian Sheldon who is a Professor and Andersons Chair of Agricultural Marketing, Trade, and Policy for the Department of Agricultural, Environmental, and Development Economics at the Ohio State University. Dr Sheldon is also an Affiliated Faculty Member of the Farm Financial Management and Policy Institute.

Media coverage of the economic impact of the Iran conflict has predominantly focused on what is happening to oil prices which spiked at $119.50/barrel on March 9 (New York Times, 3/9/2026), falling later in trading as the G7 countries began discussing the potential joint release of emergency oil reserves (Guardian, 3/9/2026). Not surprisingly, US gas prices at the pump have increased, and US Treasury yields have risen reflecting investor concern about a recession combined with an inflation rate forecast to reach 4.5% over the next 12 months (New York Times, 3/9/2026). The increase in oil prices, and its expected inflationary effect comes at a time when US farmers are already facing a squeeze on their margins, along with disruption to agricultural export markets following China’s retaliation against US tariffs.  USDA is currently forecasting that US farm income will fall this year, despite expected direct payment support of $44.3 billion in 2026 (Farm Policy News, 2/6/2026).

Added to the pressure of oil prices on US agricultural profitability is the impact of the Iran conflict on international fertilizer trade and prices, given effective closure of the Strait of Hormuz, the sea lane that connects the Persian Gulf with the Gulf of Oman through to the Arabian Sea (Guardian, 5/9/2026).  Five countries in the region, Iran, Saudi Arabia, Qatar, the United Arab Emirates, and Bahrain, account for about a third of urea that is globally traded via the Strait of Hormuz, urea being the most widely used nitrogen-based fertilizer (New York Times, 3/7/2026). These five countries have exported $50 billion worth of nitrogen fertilizers since 2020, the United States importing $5billion worth over that same period (Farm Policy News, 3/9/2026).

The key feedstock for urea production is natural gas, which is steam-reformed to generate hydrogen, an input in the Haber-Bosch process to produce ammonia, the latter being combined with carbon dioxide to produce urea (Nature Communications, 2023).  Consequently, access to cheap natural gas is critical for production of ammonia and subsequently urea, significant investments having been made in both ammonia and urea production capacity in countries such as Qatar and Saudi Arabia (The Conversation, 3/5/2026).

Closure of the Strait of Hormuz has resulted in delays in the export of both liquid natural gas (LNG) and ammonia, key inputs in nitrogen fertilizer production, as well as urea itself.  Qatar Energy has already halted production at the world’s largest urea plant due to loss of natural gas feedstock after a missile attack on its LNG facilities.  While other urea plants in the region are still operating, stockpiling is occurring in the vicinity of ports, although there is uncertainty about available storage capacity if the conflict continues (New York Times, 3/7/2026).  Added to this, the fertilizer market was already tight before the conflict started, with China restricting exports, while European producers have cut output due to the loss of cheap Russian natural gas (Reuters, 3/5/2026).

Not surprisingly, the fertilizer supply shock has already affected markets, with urea prices on the widely-watched Egyptian market increasing from $485/ton to $665/ton since the conflict began (New York Times, 3/7/2026).  At the same time, even though there is domestic nitrogen fertilizer production, the United States is a net importer, prices in New Orlean increasing from $516/ton to $683/ton in the past week (Farm Policy News, 3/9/2026).

The combination of the urea supply shock, and the knock-on effect on urea prices, presents a problem for US farmers as they enter the spring planting season. Even though both farmers, importers, and retailers have already made forward purchases of fertilizers, import demand is typically high in March, April, and May, but because of delivery logistics this cycle could be negatively affected (National Corn Growers Association, 3/5/2026). It takes 30-45 days for a cargo of urea loaded in the Persian Gulf to reach the port of New Orleans, and an additional 3-4 weeks for it to be transported and made available to farmers, i.e., in the absence of the supply shock, urea would not be available until early-May.  Consequently, choking off exports now could impact spring fertilizer application (Farm Policy News, 3/4/2026).  Former USDA Chief Economist Seth Meyer suggests that, “Farmers could cut back on corn, which requires high rates of nitrogen fertilizer, or else sharply reduce fertilizer application rates” (Reuters, 3/5/2026), other observers suggesting that outside the core Corn Belt, this could push farmers into switching out of corn into soybeans (Farm Policy News, 3/9/2026).

Fragility of the fertilizer supply system extends beyond nitrogen supply, the key producers of urea in the Persian Gulf also accounting for a fifth of global trade in phosphate fertilizers (New York Times, 3/7/2026).  At the same time, sulfur exports from the region will also be affected, the Middle East accounting for about 45% of global sulfur trade (Guardian, 5/9/2026).  Sulfur is a byproduct of oil and natural gas processing, primarily used in the production of sulfuric acid, which itself is a key to production of ammonia, as well as phosphate fertilizers such as diammonium phosphate and monoammonium phosphate (Reuters, 3/5/2026).

Overall, higher fertilizer prices not only have the potential to reduce crop yields in the United States, but there will also be spillover effects in countries such as India which relies on imported LNG to supply its urea plants, while Brazil depends to a large extent on imported nitrogen and phosphate fertilizers to produce soybeans and corn (The Conversation, 3/5/2026).  At the same time in developing regions such as sub-Saharan Africa, fertilizer use is already very low (Food Policy, 2017).  Consequently, the Iran conflict has the potential to negatively affect global food security through both reduced production and higher prices (New York Times, 3/7/2026). 

This article was authored by: Ian Sheldon, Professor and Andersons Chair of Agricultural Marketing, Trade, and Policy, Agricultural, Environmental, and Development Economics, Ohio State University. Contact information: 614-292-2194 or sheldon.1@osu.edu