Volodymyr Kolot, partner at Agro Gas Trading

Global markets are in turmoil. Commodity, raw material, and currency markets are all reacting to the new geopolitical reality caused by the major war in the Middle East. After several years of relative stabilization, the global economy is once again facing the risk of a major shock — and this time, one of the most vulnerable segments is the nitrogen fertilizer market.

The reason is simple: the Middle East is one of the world's key centers for the production and export of nitrogen fertilizers, and any disruptions in this region instantly spread to global supply chains. Today, the market has received several negative signals at once – from threats to logistics to the risk of production stoppages. The result is a dangerous combination of factors that could lead to a shortage of fertilizer and a sharp rise in prices.

Logistics and energy in the focus of the war

Qatar, Saudi Arabia, Oman, the UAE, Kuwait, and Bahrain – over the past decades, the Arab monarchies have created large-scale complexes for the production of nitrogen fertilizers, possessing large deposits of gas, which is a key raw material in the technological chain. In fact, these countries dictate global fertilizer prices, benefiting from their advantageous geographical location between the two largest consumers of this product – Europe on one side and China and India on the other. The Arab monarchies account for about a third of global nitrogen fertilizer exports.

The name of the Strait of Hormuz has become one of the most frequently mentioned in world news in recent weeks, as it is a strategic transport artery between the Persian Gulf and the Indian Ocean. Not only does a significant share of global energy flows pass through it, but also a large volume of maritime fertilizer exports from Middle Eastern countries.

Any restrictions on shipping in this area immediately affect the cost of logistics. Already, ship insurance and freight rates have increased 10-12 times, which will be reflected in the final cost of fertilizers.

The general deterioration of shipping safety in various regions of the world, including the Indian Ocean, the Persian Gulf, the Mediterranean Sea, and the Black Sea, is putting additional price pressure on maritime logistics. Commercial vessels, especially tankers and gas carriers, are increasingly becoming targets of attacks or are at risk of being attacked, which will also affect fertilizer transportation.

The second important risk factor is energy. Qatar's decision to suspend liquefied natural gas (LNG) production after Iran's attacks was a threatening signal for the market. In this case, it is important to understand that this is not only about destabilizing the global gas market (gas accounts for 70-80% of the cost of fertilizers), but also about the risks to fertilizer production, as Qatar accounts for more than 10% of global urea exports.

If the war in the Middle East is prolonged (and there is already talk of it lasting until September 2026), the oil and gas, port, and industrial infrastructure of the Arab monarchies will suffer systemic damage. Accordingly, the supply of fertilizers on the market will decline, and prices will skyrocket. No one can say at this point where the price rally will stop.

Fertilizers as a trigger for food inflation, or a self-perpetuating funnel of conflicts

Rising fertilizer prices traditionally have a domino effect on the global agricultural market. Nitrogen fertilizers are a key factor in the yield of most crops, so their rise in price almost inevitably translates into higher food production costs.

After the 2022 crisis, when the world had already experienced a sharp jump in fertilizer and energy prices, the agricultural sector did not fully recover. However, a new geopolitical shock could reignite the inflationary spiral.

The Food and Agriculture Organization of the United Nations (FAO) Food Price Index is sensitive to such fluctuations. Historically, sharp increases in the prices of grain and other basic commodities have often led to socio-political instability. Examples of this could be seen in the run-up to and during the Arab Spring, which began in Tunisia in 2010.

Today, the poorest regions of the world remain particularly vulnerable, especially African countries, particularly the Sahel region. In this region, rapid population growth (2.5% per year, with a total population of over 300 million) is combined with water shortages, soil degradation and desertification, as well as a generally weak economy. In such conditions, even a moderate increase in food prices can trigger new waves of instability.

Thus, the world risks falling into a kind of self-perpetuating vortex of conflict, where wars provoke economic shocks, economic shocks provoke food crises, and food crises, in turn, become a catalyst for new armed conflicts.

Ukraine: sowing season under pressure

For Ukraine, the war in the Middle East has several dimensions: energy, industrial, and agricultural.

First, the rise in global gas prices inevitably affects the domestic market. This is critical for the Ukrainian chemical industry, as the production of nitrogen fertilizers is extremely energy-intensive. The rise in gas prices currently taking place on the domestic market could make the work of enterprises economically unprofitable, creating the risk of shutdowns or production cuts at those plants that are still operating.

Second, if domestic production declines, the need for foreign fertilizers will increase, which Ukraine currently imports at a cost of about $1.5 billion per year (2025 figure). But here, too, there are serious limitations. Ukrainian logistics has been operating in a war zone for four years now. Seaports are regularly subjected to missile and drone attacks, the railway infrastructure is overloaded and also under enemy fire, and the roads are in poor condition after the winter. All this complicates the delivery of fertilizers to farmers and increases their final cost.

In general, farmers are entering the sowing campaign with a set of serious challenges. Not only the price of fertilizers is rising, but also the price of fuel and logistics. Currency fluctuations and general economic and security uncertainty are creating additional pressure.

As a result, the cost of agricultural production is inevitably rising. The current sowing campaign will almost certainly be the most difficult for Ukrainian farmers since 2022, when the full-scale invasion began.

How to minimize risks

In such a situation, coordination between the state, agribusiness, and international partners becomes particularly important. It is necessary to look for tools that will mitigate price shocks and ensure a stable supply of fertilizers for farmers.

Possible areas of focus include supporting domestic production, developing alternative logistics routes, and diversifying imports. The issue of resuming operations at strategic enterprises in the industry deserves special attention.

In particular, it is important to return to the discussion on resuming the operation of the Odesa Port Plant (OPP), which has been idle since autumn 2021. Under favorable conditions, the launch of this enterprise could partially strengthen the domestic supply of fertilizers and reduce Ukraine's dependence on imports.

However, even such steps cannot completely neutralize the impact of global factors. The global fertilizer market remains deeply integrated into the international trade and energy system, so any large-scale geopolitical shocks inevitably affect it.

The current situation in the Middle East is yet another reminder of how interconnected the global economy is. Events thousands of kilometers away from Ukraine can determine the price of gas, fertilizers, and, ultimately, bread on every family's table.

That is why the key task today is not only to respond to the crisis, but also to develop a more sustainable system for ensuring agricultural production. After all, food security is not only a matter of economics, but also of national and global stability.

P.S. While this article was being prepared, it became known that armed clashes had begun between Ethiopia and Sudan.