The world breathed a sigh of relief Tuesday night in response to news that the U.S. and Iran had agreed to a two-week ceasefire. Included in the deal was a commitment from Iran to reopen the Strait of Hormuz. That doesn’t mean an immediate return to normal fertilizer shipments.
U.S. and Iranian officials both claim the ceasefire is a win for their nations. Still, no official details of their agreement have been publicly released thus far.
In a Tuesday social media post, President Donald Trump said the deal includes the “complete, immediate and safe” opening of the Strait of Hormuz. Iranian representatives later said the reopening comes with a caveat. They plan to charge ships going through the strait $2 million, which will be split between Iran and neighboring Oman. Those funds will purportedly be used to repair war damage.
Israel also agreed to halt bombing in Iran. However, Israel has reportedly continued military operations in Lebanon against the Iranian-backed Hezbollah militant group. On Wednesday, representatives of Iran’s Revolutionary Guard Corps threatened to resume attacks if Israel did not end those attacks. How that impacts the Strait of Hormuz remains unknown.
What’s next for fertilizer supplies?
According to Deepika Thapliyal, a global fertilizer analyst with the Independent Commodity Intelligence Services, the limited reopening of the strait has taken some of the immediate panic out of the fertilizer market. Still, a two-week ceasefire is not enough to change the bigger picture.
Shipping remains far from normal. Nobody knows how much fertilizer material will move out of the strait. Also far from clear is how long the ceasefire will actually hold.
“Even with the strait technically open, cargoes may face delays and elevated war risk insurance, so a full return to normal trade is likely to take weeks or even months, assuming the ceasefire stays intact,” Thapliyal said. “And people want to exit the Strait of Hormuz. Even with a ceasefire, no one will want to enter the strait with their ships unless things return closer to normal.”
Shipowners, insurers and fertilizer suppliers are looking for proof that it is safe to ship. They likely won’t commit more vessels to the region until they see that.
As of Wednesday, fertilizer prices continued to hold firm due to continued global supply shortages. Suppliers will likely focus first on clearing delayed shipments before looking to generate new business.
Urea prices have spiked more than 70% globally since the Iran conflict began Feb. 28. Thapliyal said those prices may plateau for now, but are unlikely to go down in the short term.
“Prices could ease further into Q2 to Q3 if the ceasefire is extended, though they are likely to remain above 2025 averages due to lost volumes and higher financing and insurance costs,” Thapliyal said. “Any breakdown in talks would quickly tighten the urea, ammonia and sulfur supply and lead to more spikes.”
For U.S. farmers, the domestic fertilizer market has not been as badly affected as most of the world. U.S. urea prices are still lower than international values. Most of the domestic urea supply is coming from Russia, so shortages aren’t an immediate concern. That could change as the U.S. heads into summer.