If the Strait of Hormuz Blockade Persists, Will a "More Fierce Than 2022" Commodity Bull Market for Agricultural Products Arrive?

When the global energy hub becomes paralyzed, a systemic inflation driven by the “gas-price—fertilizer-price—grain-price” triad is lurking within the delayed pricing logic of agricultural markets.

According to Wind Information, on March 17, Bank of America released a global agricultural strategy report stating that as the Iran conflict escalates, the Strait of Hormuz has “effectively ceased commercial transit” in 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 period of turmoil than the Russia-Ukraine conflict in 2022.

Currently, the energy market shock has first erupted at the fertilizer level. Urea prices have soared by 30-40% across regions, while major agricultural commodity prices 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.”

(图：Since the outbreak of the Iran war, agricultural product prices have fluctuated unevenly)

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, 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 is brewing.

(图：Approximately 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, Europe’s and Eastern Europe’s capacities only accounted for 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 shocks. Soaring natural gas prices in Europe directly increased fertilizer costs.

Second, fertilizer production cuts. Due to high gas prices, many European fertilizer companies reduced or halted production. The report shows that Europe and the CIS accounted for about 17% and 11% of global fertilizer capacity, respectively.

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

These three factors combined created a typical “cost-push + supply contraction” scenario. The result was a sharp increase in wheat and corn prices, soaring global food 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”). Today’s fertilizer crisis is more extensive in scale and scope, with a more global impact, setting the stage for a subsequent bull market in agricultural products.

Why might this 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 significant. The core issue in 2022 was 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.

Supply is highly concentrated: about 35% from one Asian country, 16% from India, and 13% from the Middle East, which are the backbone of global fertilizer supply. Middle Eastern exports depend directly on the Gulf, and these countries’ production heavily relies on LNG from the Gulf.

Energy linkages are 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 chains are halting: Qatar’s energy companies were attacked and halted production in early March, leading to significant reductions in fertilizer production lines in India and Pakistan due to gas shortages. Fertilizer giants like Agrofert in Turkey and Europe have also begun capacity reductions.

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

This forms 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 fertilizer prices. Data shows that since the conflict, urea prices have risen 30-40%, significantly ahead of agricultural products.

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

India and Pakistan are reducing production due to gas shortages.

Europe is cutting ammonia output due to high gas prices.

Turkey is restricting 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 grain prices higher.

Energy and transportation: a second amplifier of costs

Besides fertilizers, energy prices further amplify impacts through transportation. Data shows: U.S. trucking costs have increased nearly 30%, and shipping costs by 6-8%. In Brazil, inland freight accounts for 10-15% of export prices. Since Brazil relies heavily on road transport, with diesel making up 50% of truck operating costs, this significantly raises 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 are affected differently. For example, Ukraine, post-conflict, relies heavily on trucking, with costs comprising 30-40%. The energy price increase has a larger impact on its grain prices. This will alter global trade flows and price structures.

(图：Brazil’s trucking freight has become very high)

Agricultural product 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%, while diesel has increased 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.”

(图：Rising energy markets reinforce the strength of biofuel raw materials, especially soybean oil)

Grain logic: corn is the “main player” in this bull market

In agricultural trading logic, 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 provides a layered forecast for agricultural prices by 2026:

Corn: If the conflict extends into Q2 2026, prices could rise 20-30%.

Wheat: As a hedge for food security, prices could rise 15-20%.

Soybean oil: Due to its high correlation with energy markets, prices could rise 5-10%.

BOA emphasizes that the corn market is facing an “extremely sensitive balance sheet.” Even before the conflict, U.S. farmers planned to reduce corn planting from 98.8 million acres to 95 million acres. If fertilizer shortages cause further global yield declines, the U.S. stock-to-use ratio in 2026/27 could drop sharply from 13% to 8.7%—the lowest in ten years.

“In such a low-inventory environment, corn prices could easily break above $6 per bushel. If the conflict prolongs into late 2026, revisiting the 2022 high of $8 per bushel is also possible.”

Proteins: from feed costs to end prices

The surge in agricultural prices will ultimately 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.” BOA estimates that driven by rising corn prices, Brazil’s chicken costs will increase by 6.0% in 2026, and pork by 7.8%. In the U.S., the increase is expected between 2.4% and 5.8%.

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

Why say “the trend is not over yet”?

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

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

But future impacts depend on the next planting season. The report highlights a critical time window: about six months. If the conflict persists during this period:

Fertilizer shortages will affect next season’s planting,

Especially for high nitrogen-demand crops like corn.

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

From a market perspective, what is this cycle trading?

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

“Although current positions are still below previous crisis peaks, this indicates 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 shocks vs. long-term supply contraction.

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

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

If the conflict eases quickly, the trend may halt at cost-push. But 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.”

This article is reprinted from: Wall Street Insights; Editor: Chen Xiaoyi.