How fertilizer policies could exacerbate Hormuz price shocks

The closure of the Strait of Hormuz amid the outbreak of the Iran war on February 28, 2026, put roughly one-third of global seaborne fertilizer trade at risk. Suddenly, production across the broader Persian Gulf region had no clear ocean exit. 

Focusing on two major types of fertilizer, urea and diammonium phosphate (DAP), the closure effectively blocked around 21 million metric tons (MMT) of annual urea export capacity across the Gulf region, including that of Iran, Qatar, and Saudi Arabia, along with another 4 MMT or so of DAP export capacity. The supply disruption drove global fertilizer prices up: through April, world urea prices approximately doubled and DAP prices rose about 35 percent. 

Yet how high prices go, and for how long, depends on more than the strait closure alone. The evolving export policies of the major non-Gulf fertilizer suppliers (mainly export restrictions) and the import policies of large fertilizer importing countries (mainly producer subsidies) are also affecting global supplies and prices. 

A handful of administrative decisions, often opaque and made with little or no advance notice or explanation, can move world prices by hundreds of US dollars per ton. As we saw in the grain and vegetable oil markets following Russia’s invasion of Ukraine in 2022 or with the rice market in 2023, countries often resort to export restrictions to ensure sufficient supplies for domestic consumers, and further shorting global markets. Meanwhile, India and Pakistan, the world’s largest fertilizer importers, along with many other countries, run subsidy schemes that insulate their farmers from shifts in world prices, limiting changes in global demand that can lower prices. 

Amid the current spike, such decisions could drive fertilizer prices higher still, or help lower them. In other words, whether urea peaks at US$700 or US$900 per MT – and exactly how the shock will affect agricultural production and food security – may very well depend on the policy choices these countries make in the next several months. 

An earlier blog post by Arita and Glauber described the Hormuz disruption as a fertilizer supply shock that would likely have limited impacts on grain markets and food prices more broadly. This is a different kind of shock than the last one, triggered by the Russia-Ukraine war in 2022, which disrupted fertilizer supplies while food prices were considerably higher than today. This post further explores the nature of the current shock, employing an economic model to quantify and compare impacts of various supply- and demand-side policies across key fertilizer exporting countries beyond the Persian Gulf and major importing countries – finding that these can have significant impacts of fertilizer prices. 

Restrictions on fertilizer exports across different regions 

Restrictions on traffic through the Strait of Hormuz have effectively choked off supplies from the Persian Gulf, the world’s largest fertilizer producing and (until recently) exporting region. Here again we focus on urea and DAP, two of the most widely traded fertilizer ingredients. The Gulf countries account for roughly 40 percent of global urea exports, with Iran the largest exporter (despite incomplete official reporting due to sanctions), followed by Qatar and Saudi Arabia, contributing approximately 21 MMT of annual export capacity collectively. The Gulf accounts for 23 percent of global DAP exports, with Saudi Arabia, led by Maaden, the largest producer, accounting for approximately 6 MMT of phosphate fertilizer production capacity. A planned expansion to 9 MMT under the Phosphate 3 project is not yet operational, with production expected to begin in 2027. As discussed in Arita, Wang, and colleagues at North Dakota State University (NDSU), sulfur, a critical input to phosphate production globally, is also heavily concentrated in Gulf production. The disruption therefore propagates through Moroccan and Chinese phosphate operations even though those producers are geographically distant from the strait. 

Other key fertilizer exporters, meanwhile, maintain export restrictions. As we saw in the grain and vegetable oil markets following Russia’s invasion of Ukraine in 2022 or with the rice market in 2023, countries often resort to such restrictions to ensure sufficient supplies for domestic consumers and further shorting global markets. 

The global picture 

China, Russia, Egypt and Indonesia together account for roughly 35 percent of global total exports and 47 percent of non-Gulf nitrogen and phosphate exports in 2020-2021, according to data from S&P Global Trade Atlas. All four countries have implemented some form of export quotas or restrictions since then, largely taken to maintain lower domestic prices. Their combined posture determines how much residual supply reaches world markets. Figures 1 and 2 show exports across these four countries from 2000 to 2025, revealing significant tightening during 2022-2024 in both nitrogen (urea and ammonium nitrate) and phosphate (MAP – monoammonium phosphate – and DAP) fertilizer markets. 

China maintains tight control over fertilizer trade through export restrictions, customs inspections, and import quotas aimed at prioritizing domestic supply and stabilizing prices. China has operated an administrative export control and inspection regime (CIQ) since late 2021 to adjust fertilizer export volumes in response to domestic price conditions. Controls were binding through 2022-2024. Urea exports fell from about 5-6 MMT in 2021 to just 0.26 MMT in 2024, while DAP exports declined from a pre-restriction baseline of about 6.2 MMT per year to 4.6 MMT in 2024. In 2025, the regime shifted toward a more structured quota-based system with guidance pricing, allowing a partial recovery in exports. Urea exports rose to 5.8 MMT in 2025. Russia has been moving in a more permissive direction even as other exporters have tightened. However, its quota system remains a structural lever 

Russia could pull tighter if circumstances changed. Russia introduced biannual urea and ammonium nitrate export quotas in December 2021 and has extended them repeatedly since then. The current quota for December 2025- May 2026 is set at about 18.7 MMT. In April 2026, the government announced a further increase to 20 MMT for June-November 2026, including roughly 8.7 MMT for nitrogen fertilizers and over 7 MMT for compound fertilizers, alongside a separate 4.2 MMT quota for ammonium nitrate. 

Indonesia is positioned as a swing supplier during the Hormuz crisis, as state-owned Pupuk Indonesia is the largest urea producer in the Asia-Pacific region. Several countries have requested supply. While the country’s Presidential regulation Perpres 113/2025 prioritizes domestic urea supply ahead of export licensing, an export quota of approximately 1.5 MMT can be deployed flexibly depending on domestic conditions. Indonesia therefore represents swing capacity that can move in either direction depending on policy priorities. 

Egypt maintains two main structural limits on fertilizer exports. It curtails fertilizer production seasonally, as natural gas is reallocated to the power sector during summer peak demand. A long-standing domestic supply obligation requires producers to allocate 55 percent of output to the local market, with the remaining 45 percent permitted for export. The September 2025 gas price reform adjusted this balance by raising the export share to 55 percent and reducing the domestic allocation to 45 percent, tightening local supply conditions. Periodic plant shutdowns due to interrupted Israeli liquefied natural gas (LNG) imports, most notably in May 2025 and June 2025, temporarily halted Egyptian urea output (LNG being a key input in urea production) before deliveries were resumed and operations restored. 

Read the full essay (free) here: https://www.ifpri.org/blog/how-fertilizer-policies-%20could%20exacerbate-hormuz-price-shocks/ 

Shawn Arita is Associate Director of the Agricultural Risk Policy Center at North Dakota State University; Ming Wang is a Junior Research Economist with the NDSU Agricultural Risk Policy Center; Joseph Glauber is a Research Fellow Emeritus with IFPRI’s Director General’s Office. Opinions are the authors