If the Strait of Hormuz blockade persists, is a "fiercer than 2022" agricultural commodities bull market coming?

How does the Strait of Hormuz blockade trigger a global agricultural inflation chain?

When the global energy hub stalls, a systemic inflation driven by the “gas-price—fertilizer-price—grain-price” triad is lurking behind the delayed pricing logic in the agricultural products market.

According to Wind Trading Platform, on March 17, Bank of America released a global agriculture strategy report indicating that, as the Iran conflict escalates, the Strait of Hormuz has “effectively ceased commercial transit” since early March, with multiple ship attacks occurring in the region.

The importance of the Strait of Hormuz is self-evident. About one-fifth of global oil transportation depends on this waterway. The current conflict has caused over 20 million barrels per day of supply disruptions, the largest energy disturbance in decades.

But the market quickly realized that the issue is not just oil prices. The energy shock is only the starting point; deeper impacts are spreading along the agricultural supply chain. The report shows that the global agricultural supply chain is entering a more severe turbulence than during the 2022 Russia-Ukraine conflict.

Currently, the shock in the energy market has first erupted at the fertilizer level. Urea prices have soared by 30-40% across regions, while prices of major agricultural commodities have generally increased by less than 5%. Bank of America strategist Daryna Kovalska said:

“The agricultural market has not yet fully priced in the impact of the Iran war. In our baseline scenario, the conflict will extend into Q2 2026, indicating substantial upside risks for the agricultural market.”

(Chart: Since the Iran war outbreak, agricultural product prices have varied)

Why is the market starting to reprice agricultural products?

Intuitively, the impact of Hormuz on grain transportation seems limited. The report shows that about 9% of global grain maritime trade passes through this strait. This means that, purely from a “transport disruption” perspective, it’s hard to explain the sharp fluctuations in grain prices.

But what the market trades is never just the “direct impact,” but the “transmission chain.”

This chain can be broken down into three steps: First, rising energy prices. Second, increased costs for fertilizers and transportation. Third, reduced planting supply, ultimately pushing up grain prices.

The market has already gone through the first two steps, and the third step is brewing.

(Chart: About 9% of global grain maritime trade passes through the Strait of Hormuz)

How was the 2022 agricultural bull market formed?

To understand whether it will be more intense, we must go back to 2022—the year after the Russia-Ukraine conflict erupted.

In 2022, the fertilizer crisis centered in Europe and the CIS. At that time, Russia’s ammonia exports through Ukraine’s Yuzhny port were interrupted, affecting about 23% of global ammonia flows. Europe’s natural gas crisis led to reduced fertilizer production locally, but at that time, European and Eastern European capacities accounted for only 17% and 11% of the global market, respectively. The logic behind the rapid rise in global agricultural prices that year involved three main factors:

First, energy shock. European natural gas prices soared, directly increasing fertilizer costs.

Second, fertilizer production cuts. High gas prices caused many European fertilizer plants to reduce or halt production. The report shows that Europe and the CIS accounted for about 17% and 11% of global fertilizer capacity, respectively.

Third, decline in agricultural inputs. As fertilizer prices surged, farmers reduced fertilization, directly affecting crop yields. The report notes that nitrogen fertilizer use decreased in multiple regions in 2022, becoming a key reason for rising grain prices.

These three factors combined created a typical “cost-push plus supply contraction” scenario. The final result was: significant increases in wheat and corn prices, soaring global grain inflation, and food security pressures in several emerging markets.

However, the report emphasizes that the 2022 impact was relatively localized—mainly Europe and the CIS (“a much smaller market”)—whereas today’s fertilizer crisis is more extensive and global in scale, laying the groundwork for a new bull market in agricultural commodities.

Why might it be more severe this time?

On the surface, both conflicts seem similar: geopolitical conflict → energy prices rise → agricultural prices increase.

But the structural differences are profound. The core issue in 2022 was centered in Europe and the CIS, which are not the absolute core of the global fertilizer system. This time, the shock hits the “center of the global supply chain.”

The report provides key data: India, the Middle East, and other Asian countries together account for 65%-70% of global urea supply, all closely linked to Gulf natural gas.

• Highly concentrated supply: About 35% from a certain Asian country, 16% from India, and 13% from the Middle East, which are the backbone of global fertilizer supply. The Middle East’s exports depend directly on the Strait, and these countries’ production is highly reliant on LNG from the Gulf.

• Energy link broken: Natural gas accounts for 60-80% of nitrogen fertilizer production costs. In 2022, the situation was “gas available but expensive,” but by 2026, due to infrastructure damage in Qatar and other LNG facilities, and the blockade of the Strait, it will become “gas cut off.”

• Capacity chain shutdowns: Qatar’s energy companies were attacked and halted production in early March, leading to significant reductions in fertilizer production in India and Pakistan due to gas shortages. Fertilizer giants like Agrofert in Turkey and Europe have also begun capacity reductions.

Simply put, Gulf countries are both major fertilizer exporters and key global natural gas suppliers, with natural gas being a critical raw material for nitrogen fertilizer production.

This creates a “supply hub.” Once disrupted, the impact is not linear but amplified. A key sentence in the report states: “The systemic risk of the current fertilizer crisis exceeds that of 2022.”

The impact has already begun: fertilizer becomes the first domino

The market’s most sensitive response is to fertilizer prices. Data shows that since the conflict, urea prices have risen by 30-40%, leading agricultural prices.

This is not surprising, as fertilizer is the “front-end variable” of agricultural production. More importantly, supply-side changes are emerging:

• India and Pakistan have started reducing production due to gas shortages.
• Europe has cut ammonia output due to soaring gas prices.
• Turkey has restricted exports to secure domestic supplies.

These signals indicate that the market has shifted from “price shocks” to “supply contraction.”

Once fertilizer supply diminishes, farmers face two choices: reduce fertilization or increase costs. Both options will push up grain prices.

Energy and transportation: the second amplifier of costs

Besides fertilizers, energy prices further amplify impacts through transportation. Data shows: U.S. trucking costs have risen nearly 30%, and shipping costs by 6-8%. Brazil’s inland freight accounts for 10-15% of export prices. Since Brazil relies heavily on road transport, diesel costs make up 50% of truck operating costs.

Transport costs themselves account for 20-25% of grain prices. This means that even without supply reductions, rising costs alone can push prices higher.

More importantly, different countries have varying sensitivities. For example, Ukraine, heavily reliant on trucking post-conflict, has transport costs accounting for 30-40% of grain prices. The energy price increase impacts its grain prices more significantly. This will alter global trade flows and price structures.

(Chart: Truck freight in Brazil is already very high)

Agricultural prices are influenced not only by supply but also by energy demand. Take soybean oil: as a biofuel raw material, its price is highly correlated with energy.

Data shows: Soybean oil has risen about 10%, diesel by about 50%. Although the percentage increases differ, the direction is the same. This means that when energy prices rise, agricultural products are affected both by “cost increases” and “demand pull.”

(Chart: Rising energy markets reinforce the strong prices of biofuel raw materials, especially soybean oil)

Grain market: corn as the “main player” in this bull run

In the logic of agricultural trading, the pass-through of fertilizer costs is uneven. The dependence of different crops on nitrogen fertilizer determines their price elasticity.

Corn is a typical “high nitrogen-consuming” crop. According to research from South Dakota State University, each acre of corn requires 100-240 pounds of nitrogen fertilizer, while soybeans need almost none. This means that when urea prices soar, the production costs and planting area of corn are most affected.

Bank of America’s forecast for 2026 agricultural prices is layered:

• Corn: If conflict persists into Q2 2026, prices could rise 20-30%.
• Wheat: As a food security hedge, up 15-20%.
• Soybean oil: Due to high correlation with energy markets, up 5-10%.

Bank of America emphasizes that the corn market faces an “extremely sensitive balance sheet.” Even before the conflict, US farmers planned to reduce corn planting from 98.8 million acres to 95 million acres. If fertilizer shortages cause further global yield declines, the US stock-to-use ratio in 2026/27 could drop from 13% to 8.7%—a decade low.

• “In such a low-inventory environment, corn prices could easily break $6 per bushel. If the conflict prolongs into late 2026, it could even test the 2022 high of $8 per bushel.”*

Protein: from feed costs to end prices

The surge in agricultural prices will eventually translate into inflation in end-point proteins (poultry, pork, beef).

The Middle East is a major importer of animal protein, with 70% of consumption being poultry. Brazil is the region’s largest supplier, accounting for 47% of the market.

“In Brazil, feed accounts for about 65% of chicken and pork production costs.” Bank of America estimates that driven by rising corn prices, in 2026, Brazil’s chicken costs will increase by 6.0%, pork by 7.8%. In the US, the increase is expected between 2.4% and 5.8%.

Additionally, blockade of the Strait extends shipping routes, increasing transit time from Brazil to the Middle East by 30-35 days, further raising onshore premiums.

Why say “the trend is not over”?

A key judgment is that agricultural prices have not yet fully reflected the risks.

The reason lies in time lag. Agriculture has a cycle: fertilization is completed in spring; short-term yields are less affected now.

But future impacts depend on the next planting season. The report highlights a roughly 6-month window. If the conflict persists within this period:

• Fertilizer shortages will affect next season’s planting.
• Especially for corn (high nitrogen demand).

Therefore, the market may see a “cost increase first, then supply contraction” two-phase trend.

What is the market trading on now?

CFTC data shows that since the Strait conflict erupted, institutional investors have rapidly shifted from long-term net short positions to net long positions in agricultural commodities.

“Although current positions are still below previous crisis peaks, this indicates that the market is re-evaluating the pricing logic of the agricultural sector.”

For Wall Street traders, the logic is now complete: energy shortages triggered global fertilizer reductions (especially nitrogen), which not only increased planting costs but also threatened future yields. Coupled with the rapid pass-through of inland logistics costs, agricultural markets are replicating, or even surpassing, the 2022 bull narrative.

Overall, the market is trading three variables:

First, the duration of the conflict. Short-term shock vs. long-term supply contraction.

Second, the recovery of fertilizer supply. This is the key variable determining yields.

Third, the path of energy prices. Influencing both costs and demand.

If the conflict eases quickly, the trend may stall at cost-push inflation. If it persists, it could evolve into a supply-driven bull market. The report concludes: “Agricultural markets may enter a new bull cycle, similar to 2022 or even 2012.”