Strait Of Hormuz Risk: Fertiliser Stocks May Be the Next Casualty

The Strait of Hormuz (SOH) ─ the narrow seawaterway between the Persian Gulf and the Gulf of Oman and still in absolute control of Iran ─ is one of the world’s most vital chokepoints for global energy & other commodity transportation. Almost 20% of global oil & gas (LNG) has to pass through this narrow lane (only 2 miles wide shipping lanes) ─ most of which (80-90%) are for Southeast Asian countries led by China, India, Japan, South Korea, etc. Apart from Iran, almost all oil & LNG exports from the rest of the Gulf (GCC) producers like Saudi Arabia, Iraq, the UAE, Kuwait, Qatar, etc. have to pass through this chokepoint. There are a few practical & feasible alternatives, including the Saudi-controlled Red Sea corridor. The SOH is not only vital for Asian energy security but also critical for various other commodities, including fertilisers. Similarly, GCC countries also depend significantly on this SOH lifeline for their food imports.

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Iran is now using the SOH as leverage against US military aggression, economic coercion and USD hegemony

The 2026 Iran War, now entering its fourth week, has disrupted the entire Middle East. Launched on February 28 with coordinated US-Israeli airstrikes on Iran under Operation Epic Fury, the conflict has primarily targeted Iranian nuclear facilities, military infrastructure, including missile ecosystems and air defences, and also senior political regime figures, including the killing of Supreme Leader Ali Khamenei. Iran has responded with operation ‘True Promise’─ballistic/ICBM/cluster and also hypersonic missiles and a barrage of drone swarms. But the de facto restriction of Iran on shipping through the Strait of Hormuz has effectively disrupted commercial shipping through this narrow strait. While headlines have focused primarily on oil and liquefied natural gas (LNG), a quieter but potentially more damaging shock is unfolding in the global fertiliser market as almost one-third of global seaborne fertiliser transportation occurs through this Iran-controlled SOH chokepoint.

The SOH is not only a transit route ─ it’s the heart of global fertiliser supply

Almost 33% of the seaborne global fertiliser trade, including a significant volume of Urea, Ammonia and Sulphur, has to be transported through the SOH. All major GCC fertiliser producers like Qatar, Saudi Arabia, the UAE, and Bahrain rely on this route for exports and feedstock. As of now, Iran is permitting only a few friendly countries, like China, India, and Japan, to use this SOH for an exorbitant fee (toll-tax) in Chinese Yuan. Iran is not permitting any ship related to adversary countries like the US and Israel, and also those countries/GCCs from where the US attacks on Iran are originating, i.e., almost all the GCCs having US military bases. 

The current SOH disruptions driven by heightened security risks & higher insurance costs, force majeure declarations, and halted operations have aided a further sharp increase in prices and logistical bottlenecks for not only energy but also for other commodities, including fertilisers. The GCC is a global fertiliser production hub due to cheaper gas. India ─ the world’s most populous country, having almost 1.5 billion people is the 2nd largest consumer and one of the largest importers of fertilisers. 

Almost 50% of India’s fertiliser imports (finished products + critical inputs) come from the entire Middle East/Persian Gulf producers through the SOH chokepoint. India imports around 25% of its total fertiliser consumption (finished products + inputs), and the rest is produced locally, but it is heavily dependent on critical input imports for that too. India also imports around 50% of its total import requirement of fertilisers & related inputs from non-Gulf countries, including Russia, China, Morocco, Belarus, etc. During the onset of the Ukraine war in early 2022, India also faced some disruption from Russian & Belarusian supplies (both logistics & sanctions issues). 

Anyway, as per various estimates, India imported around 22 MTs (million tonnes) of fertiliser in 2025, and out of that, almost 50% (~11 MTs) comes from the Persian Gulf Countries (PGCs) and 30% (~6.5 MTs) from Russia alone. Thus, Russia is now the largest single foreign supplier of Fertilisers (finished products + inputs) to India. India’s fertiliser imports from Russia surged in 2024-25, and India is now also looking for more supplies from non-Gulf fertiliser suppliers, led by Russia, Belarus and Morocco. China has its own export constraint for fertilisers and may not be in a position to supply significantly higher quantities to India after its own domestic consumption buffer. The demand for fertiliser has increased in recent times in India due to successive good monsoons, which are positive for good agriculture & farm harvesting.

Fertiliser: India vs China ─ overall picture

India consumed around 72 MTs of finished fertiliser products in 2025, against China’s 77 MTs of domestic consumption (agri + industrial). India produced around 52 MTs against China’s approx. 153 MTs (75 MT finished products + 78 MT intermediaries). China also imports around 13 MT of finished products, mainly from Russia, and exports around 46 MT (finished products + inputs). China is the world’s largest producer of fertiliser products and is also a huge exporter. China’s near self-sufficiency and huge surplus ensure minimal risk from the SOH disruption, and China may also supply India a higher quantity if it eases its current export control. The abundance of coal-based feedstock (instead of LNG) in China, which helped it become the largest producer of fertiliser globally, has huge scale & efficiency ─ massive demand from various industrial sectors such as chemicals, resins, plywood, etc.

India’s fertiliser production/consumption is more agriculturally focused and is heavily dependent on imports ─ often a victim of geopolitical tensions, western sanctions and subsequent geopolitical fragmentations. For India, this represents both cyclical & structural vulnerability that could ripple through agriculture, food security, and fiscal policy, i.e., both Main Street and Dalal Street.

As per various reports, India’s stocks of urea, DAP, and NPK complexes stood higher compared to last year as of early March 2026 ─ providing some buffer through the lean pre-Kharif period until mid-May. India has proactively issued global tenders, secured early shipments, and is trying to diversify imports from non-Gulf regions like Russia, Belarus, Morocco, Canada, Indonesia, and even China. However, these potential diversifications come at a premium and lead time, as India’s overall nature is a reactive strategy rather than a predictive one – be it energy products (including LPGs) or fertilisers. The Indian economy may suffer meaningfully if the Iran war crisis lingers over the next few months.

Potential Headwinds of Iran War Tensions and energy & fertiliser crisis for India

There are multi-dimensional channels, which can affect the overall Indian economy and also the stock/financial market:

• Higher USDINR (Rupee depreciation)
• Global & local spikes in energy products and also fertilisers
• Higher import bill and higher imported inflation
• Higher & delayed subsidies for energy products & fertilisers, and higher fiscal deficit and lower discretionary spending by the government (like infra)
• Supply scarcity of fertiliser may result in lower food production and higher food inflation, affecting the food security of the country.
• Higher prices for energy products may also result in higher core inflation due to the transmission effect (like through potentially higher cost of logistics, LPGs, etc.)
• RBI may have been on hold instead of the expected 50 bps cuts in 2026, and may even be forced to hike if the Fed chooses the same
• Higher bond yield may also result in higher borrowing costs for both the public and private sectors (including businesses & households) – affecting interest-sensitive sectors like Real Estate, automobiles, etc.
• The Middle East energy & fertiliser crisis, if it lingers, may result in lower outputs, lower economic growth, an adverse rural economy, a weak labour market and subdued discretionary consumer spending─it may also result in muted corporate earnings growth.

Major sectors that may be adversely affected due to the lingering Iran war crisis

• Rural & agri-savvy tractors, two-wheelers, seeds/pesticides (chemicals) and also FMCG and MFIs (direct/indirect effects)
• Downstream sectors (Fertiliser users) ─ like Chemicals, resins, Plywood, etc.
• Downstream sectors such as LPG users (via higher & scarce LPG) and quick-service restaurants (QSRs) could also face closure & margin pressure. 
• Potential gig workers’ distress (SWIGY/Zomato) may also affect the urban gig economy.

In brief, for an import-oriented economy like India, where agricultural & allied activities employ a significant workforce in addition to gig workers, the potential crisis out of fertilisers and energy products may extend beyond the formal sector of the economy and corporate balance sheets to macroeconomic stability. The overall direct & indirect impact of the lingering Iran war crisis may result in a stagflation-like scenario in India (higher inflation, higher unemployment and lower economic growth); both exports & imports may be affected directly/indirectly due to the SOH crisis.

Potential Tailwinds

The Iran war crisis's impact on Indian Fertiliser Stocks is positive so far (windfall gains) due to expectations of lower imports from competitors and higher realisations and policy support. Listed fertiliser companies have exhibited volatility amid the crisis: Chambal Fertilisers, Rashtriya Chemicals & Fertilisers (RCF), Deepak Fertilisers, Gujarat State Fertilisers & Chemicals (GSFC), and Fertilisers and Chemicals Travancore (FACT) have seen sharp short-term rallies on expectations of higher realisations, reduced import competition, and government gas prioritisation orders. Coromandel International, a major player in DAP and complexes, faces mixed dynamics due to higher import costs for phosphatic products. However, prolonged input cost inflation without corresponding government subsidy support could squeeze margins for importers and subsidy-dependent players.

Conclusions

The Hormuz fertiliser bottleneck underscores India’s enduring structural dependence on imported inputs despite years of “self-sufficiency” initiatives such as nano-urea and domestic capacity additions. While the current high buffer stocks, proactive diversification of the supply chain and hopes for a 30-day initial Iran war ceasefire (including a free SOH chokepoint) may provide temporary/cyclical relief, the issue is the strategic independence and food security of the nation. Thus, policymakers need to be more predictive & productive rather than merely reactive and proactive to ensure the food security of India.

For Dalal Street investors, the situation presents a dual-edged sword. A cyclical windfall gain may arise in efficient domestic urea (Fertiliser) producers with strong balance sheets, but structural risks remain for the overall sector & the economy—subsidy uncertainties, margin volatility, and potential rural demand slowdowns.  Ultimately, the 2026 Hormuz crisis serves as a stark reminder that geopolitics & global policies can swiftly reshape local commodity cycles, macroeconomics and corporate balance sheets.