A second Hormuz shock is hitting Gulf fertilizer producers with empty buffers

The Gulf's fertilizer system is more vulnerable than it was during the first Hormuz shock — because the storage and routing buffers that got it through that shock are now largely spent. That makes the second prolonged closure more likely to force production cuts than simply delay cargoes.

The brief reopening cleared cargoes, but never restored the shipping cycle behind them. “The renewed disruption has largely reset the clock on any return to normalization. In recent weeks, the main improvement had been in outbound movements, while inbound vessel traffic remained limited,” Willis Thomas, head of fertilizer analysis at CRU Group, tells EnterpriseAM.

IN CONTEXT- By mid-July, an estimated 850k tons of urea were stranded across Iran and the Arabian Gulf as most regional shipments ground to a halt, according to the ICIS. The World Trade Organization also said fertilizer shipments through Hormuz remained close to zero, suggesting the disruption had yet to ease, according to a briefing.

The storage clock is ticking

Outbound movements solved only half the problem. A loaded vessel leaving the Gulf clears an old cargo, but an empty vessel entering the Gulf gives a producer somewhere to load newly manufactured fertilizer. Without sustained return of inbound ships, sporadic outbound crossings can make trade data look better while plants keep adding product faster than the shipping system can move it.

Storage will run out before production does: “Given that storage capacity is now much more limited than earlier in the disruption, those producers are at the greatest risk of being forced into output reductions due to a lack of storage rather than any direct production-side constraint,” Thomas argues.

The first closure showed how fast those buffers can run out. CRU estimated in April that 55-60% of Middle Eastern urea output had already been halted during the initial closure, while at least 44 fertilizer vessels were stranded inside the Gulf. The renewed disruption is more dangerous because some of the storage flexibility used during the first shock is no longer available.

Saudi Arabia and Oman have escape routes. Bahrain, Qatar, and the UAE don’t. The latter three are the most exposed because they have limited practical scope to export bulk fertilizer without crossing Hormuz, Thomas notes, while Saudi Arabia can move some volumes west to Yanbu, and Oman’s principal export facilities sit outside the strait.

Rerouting is no longer a durable buffer

If storage was the first buffer, rerouting was the second — and that buffer is becoming less reliable too. Saudi Arabia built the Gulf’s most substantial fertilizer workaround. Ma’aden moved phosphate fertilizer from Ras Al Khair to Yanbu by road after Hormuz closed, eventually deploying some 3.5k trucks across its Gulf-to-Red Sea logistics operation, the Wall Street Journal reported. Sabic followed with urea, using an estimated 1.3k truckloads to move a single 25k-ton cargo from Jubail to Yanbu, Argus reported.

That workaround kept some Saudi supply moving, but at materially lower efficiency than direct bulk exports from Gulf ports. Saudi producers remained cautious about fresh Ras Al Khair loadings even during the previous reopening, while Ma’aden planned to load 120k tons of global diammonium phosphate (DAP) sold to India from Yanbu instead.

The Red Sea stopped being a reliable release valve. Houthi attacks on Saudi facilities and shipping have placed Yanbu and the Bab Al Mandab route under direct pressure. Traffic has recovered from its late-July low but remains volatile, falling to 18 commodity vessels on 2 August from 27 a day earlier and 28 on 31 July. Two tankers carrying Saudi crude crossed with their transponders switched off, while another product tanker abandoned its Red Sea route and rerouted around Africa.

The two-chokepoint exposure is concentrated: Most fertilizer cargoes don’t need to cross both Hormuz and Bab Al Mandab — the exposure is concentrated in Saudi phosphate shipments that leave through Yanbu and potash exports from Jordan and Israel, Thomas explains. That still leaves Saudi phosphate volumes particularly exposed. The Kingdom accounted for around 19% of combined DAP and monoammonium phosphate exports in 2025. Ma’aden says its phosphate operations have 6 mn tons of annual capacity and supply a fifth of the traded phosphate fertilizer market.

What happens if this drags on?

Nitrogen would spike again — but less violently. A one- to three-month closure would likely push urea and ammonia prices sharply higher at first, before values retreat as buyers switch origins, vessels reposition, and trade routes adapt, Thomas says. The rise, and the correction that follows, should be less severe than during the war’s opening phase, because traders, producers, and importers are now better prepared to manage another prolonged disruption.

Sulphur and phosphates would stay higher for longer. A prolonged closure would likely keep sulphur and phosphate prices elevated even after nitrogen begins correcting, “with phosphates in particular retaining meaningful upside risk,” Thomas tells us. Tight sulphur availability, particularly at prices that keep phosphate production commercially viable, has already contributed to temporary production curtailments in parts of Africa and the Americas, Thomas says. A deeper or more prolonged interruption to Middle Eastern sulphur and phosphate exports could tighten availability further and trigger additional production cuts outside the Gulf, he adds.

Delayed buyers and seasonal demand are reinforcing the rebound. Buyers who postponed purchases in anticipation of lower prices are now returning as values rise, Thomas says. That restocking is set to overlap with stronger seasonal demand through August in Brazil and later Europe, followed by the US in September, leaving little room for prices to retreat while Middle Eastern supply stays constrained.

What’s next: A fresh wave of outbound cargoes won’t mean the market has recovered. “Indicators that the market is stabilizing rather than merely clearing a temporary backlog would include a sustained recovery in inbound vessel traffic, a normalization of ins. terms and freight premiums, evidence of renewed inventory rebuilding at origin, and a return to more routine loading patterns rather than sporadic clearance of stranded cargoes,” Thomas adds.