A couple months ago, most farmers and others that follow the agriculture industry knew very little about the Strait of Hormuz. However, since late February this tiny strait in the Persian Gulf has dominated agricultural news, as well as U.S. business news in general.
In late February, the United States and Israel became involved in the war or conflict with Iran (so-called “Operation Epic Fury”). Iran controls much of the eastern border of the Persian Gulf, including the Strait of Hormuz, and has threatened to attack ships transporting any goods through the strait. Other Western Asian (Middle East) countries in the Persian Gulf region that rely on export and import shipping through the strait include Saudi Arabia, Oman, Qatar, Kuwait, Iraq, and the United Arab Emirates (UAE), which all play a role in the world agriculture economy.
The Strait of Hormuz is a narrow passageway that is located between Iran and Oman that links the Persian Gulf to the Gulf of Oman and the Arabian Sea, and serves as the outlet for shipping goods to other countries. The strait is approximately 21 miles wide; however, the width of the actual shipping lane in either direction for large cargo tankers is only about 2 miles wide. This makes cargo ships very easy targets within the strait during a wartime environment, such has been occurring in the region in the past few weeks.
Prior to the start of the war with Iran, an estimated 138 vessels passed through the strait on a daily basis. As of March 20, it was estimated that Iran had conducted 21 strikes on ships attempting to pass through the strait. Only a few ships from countries that are friendly to Iran have been allowed to pass through the strait since the war began. It normally takes about 30 days for a loaded cargo ship to travel from the Persian Gulf to ports in the United States.
The focal point of the mainstream media related to the war in Iran and the economic impacts of the Strait of Hormuz has focused on disruptions to the worldwide supply of oil, as well as the impacts on the world oil price. In a normal situation, approximately 20 million barrels of crude oil and other petroleum products, or 20 percent of the global demand, travels through the strait on a daily basis. If the war lasts for a long period of time, it could impact oil supplies in portions of Europe and other locations in the world that are heavily dependent on Mideastern oil. World oil prices increased by over 40 percent from late February to mid-March, trading at over $100 per barrel for the first time since the beginning of the Russia-Ukraine conflict in 2022.
The war in Iran does not impose an immediate oil supply concern in the United States; however, since oil is traded on a worldwide basis, the rapid increase in the world oil price has caused retail gas prices to increase significantly in the United States.
In most areas, gas prices had risen nearly $1.00 per gallon by March 20, since the start of the Iran war in late February. Retail gas prices were $3.75 to $4.00 per gallon in many areas, with prices topping $5.00 per gallon in some states. The price of diesel fuel also increased dramatically from late February until mid-March, reaching $4.50 to over $5.00 per gallon in many areas. This represents an increase of approximately $1.50 per gallon, or about 40 percent, in the past couple of months. The price of diesel fuel is an important factor in farm expenses and in providing food and goods to U.S. consumers.
The fertilizer impact
Probably the biggest concern for the agriculture industry resulting from the ongoing war in Iran is the potential impact on the U.S. and worldwide fertilizer supply, along with the potential for large increases in the future cost of fertilizer.
The countries in the Persian Gulf region are major producers of many types of fertilizer that are used around the world for crop production. The region is a major producer of nitrogen fertilizer that is very important for the production of corn, wheat, cotton, and other crops. Approximately 43 percent of the urea and 27 percent of the anhydrous ammonia in the world, which are both important nitrogen fertilizer sources, are shipped through the Strait of Hormuz each year. In addition, about 44 percent of the sulfur and 16 percent of the phosphate fertilizer is shipped through the strait annually. Any impacts on these fertilizer resources not only affects the United States, but impacts nearly every major agricultural country in the world.
Iran also holds some of the largest natural gas supplies in the world, which plays a key role in the production of ammonia fertilizer. Some Middle Eastern countries outside of the Persian Gulf region that are major producers of ammonia rely on getting natural gas from Iran and other countries in that region for production purposes. Sulfuric acid is required to produce phosphate fertilizers and many countries rely on sulfur from the Persian Gulf region for their phosphate production. If these countries do not have access to an adequate sulfur supply, they will not be able to produce enough phosphate fertilizer to meet world demand.
The United States relies both on domestic production and imports from other countries to meet the fertilizer needs of U.S. farmers. The impact of outside conflicts, such as the war in Iran, varies by the fertilizer nutrient. The United States imports approximately 18 percent of the nitrogen and 13 percent of the phosphate that are used on an annual basis, which could be subject to global trade disruptions caused by the current war. The United States also imports about 97 percent of the potash fertilizer used in crop production; however, a large majority of the potash is imported from Canada. In fact, 52 percent of all fertilizer imports into the United States come from Canada, compared to only about 10 percent of imports from the Persian Gulf region.
Impact on fertilizer prices
Similar to oil, the prices for most fertilizer nutrients are set on a worldwide basis, due to the major fertilizer companies being multinational and selling fertilizer around the world. This means that even though the United States does not import large quantities of certain fertilizer nutrients from the Persian Gulf region, the price increases caused by the shipping restrictions in the Strait of Hormuz may still impact fertilizer prices in the United States. For example, if countries that rely heavily on Persian Gulf fertilizer sources are forced to go elsewhere to meet their needs, it will likely increase nutrient costs in those countries. In addition, if fertilizer supplies get tight, some countries may restrict exports or put extra export fees or tariffs on fertilizer that is exported.
The cost of all types of nitrogen fertilizer and phosphate increased significantly following the initiation of the war in Iran and have stayed quite high into mid-March. The price of urea fertilizer in the United States increased by about 25 percent, or around $75 to $100 per ton from late February until mid-March. Fertilizer prices for 2026 crop production were already considerably higher than costs in 2024 or 2025 for similar fertilizer products. For example, the cost of urea in early February, prior to the start of the conflict in Iran, was already 17 percent higher compared to a year earlier, and the cost of anhydrous ammonia was 15 percent higher. The cost of phosphate was up 11 percent and potash costs increased by 9 percent, compared to a year earlier. The 2026 average fertilizer cost before the conflict in Iran for corn production in the Midwest was estimated to be $20 to $30 per acre higher than fertilizer costs in 2024 or 2025.
Final thoughts on Iran war impacts
Many farmers in the Upper Midwest had already locked in their fertilizer needs and costs for the 2026 growing season, so for those producers, the rapid increase in fertilizer costs may have a minimal impact on fertilizer expense for the current year. However, for the farmers that usually wait until planting season to purchase their fertilizer, the 2026 fertilizer expense could be considerably higher.
In addition, some producers may face challenges in getting adequate fertilizer nutrients to meet their needs for the coming growing season if fertilizer supplies get tight. In areas where fertilizer cost and availability become an issue this spring, there could be some switching from intended corn acres to soybeans for the 2026 growing season.
The impacts of the war in Iran on U.S. farmers will likely depend on the length of the conflict and how long it takes to get the Strait of Hormuz fully operational again. If the war in Iran continues or expands in the coming weeks and months, farmers will likely see higher diesel fuel costs throughout the current growing season, as well as potentially higher natural gas and propane costs for drying crops in the fall. The higher fuel cost will likely increase the cost of most other farm expenses as well in the coming months. Significantly more U.S. producers would be impacted by higher fertilizer prices and tight supplies by this fall if the conflict continues.
Kent Thiesse is a Farm Management Analyst from Lake Crystal, Minn. He can be reached at (507) 381-7960 or kentthiesse@gmail.com.