Stranded fertilizer and costly diesel could cut global harvests in 2027

The Hormuz shipping crisis is moving from fuel to food. Disrupted Gulf fertilizer shipments, expensive diesel, and one of the strongest El Niño events on record could combine into a food security crisis, the S&P Global Institute warns in its first major report, according to the Financial Times. Farmers face higher production costs just as extreme weather threatens major food-producing regions.

Hormuz is a fertilizer chokepoint. Almost a third of global trade in urea, the world’s most widely used nitrogen fertilizer, typically passes through the strait. So does almost half of global sulphur trade and about a fifth of merchant trade in ammonia. Around half of global food production depends on synthetic nitrogen fertilizers.

The fertilizer shock is spreading beyond the Gulf

Gulf fertilizer exports have barely restarted. Only eight urea vessels left Gulf waters in September, and ammonia shipments have all but stopped. By mid-July, about 850k tons of urea were stranded across Iran and the Arabian Gulf, per ICIS. With limited storage and few empty vessels coming in, producers can be forced to cut output even when some loaded ships get out.

Sulphur prices doubled. Sulphur, a key fertilizer nutrient, rose to USD 1k per ton between January and July, before easing to USD 810 by the end of September, S&P says. Exports fell an estimated 39% y-o-y to 6.1 mn tons in 2Q. Morocco’s OCP, which imports around 3.7 mn tons of sulphur annually from the region, is among the producers exposed.

South Asia has been hit hardest. Gulf producers are an important source of urea for India, and LNG supports about 85% of its domestic urea production. In Bangladesh, four of the country’s five urea plants have shut since March for lack of LNG. India is locking in supply elsewhere. In May, state-run Indian Potash secured more than 1.3 mn tons of diammonium phosphate, 42% of it from MENA producers. Oman’s Omifco, whose urea and ammonia plants at Sur sit outside Hormuz, has kept exports flowing.

Diesel is squeezing farmers from the other side. Middle East diesel exports have fallen by more than half since July 2025, to less than 1 mn bbl / d, S&P says. Crude exports were back near pre-war levels by late September, but diesel and gasoline shipments were running at 58% of pre-war volumes, according to JPMorgan. Facing pricier fuel and fertilizer, farmers either cut fertilizer use or plant less, and “either way, less food would be produced,” S&P says.

El Niño could compound the damage in 2027

A strong El Niño is on the horizon. The US National Oceanic and Atmospheric Administration projects that Pacific sea surface temperatures will reach at least 2°C above normal. Only seven episodes since the 1950s have reached that threshold. The resulting droughts and floods could damage harvests across Asia, Africa, and Latin America.

The forecasts are already coming down. S&P cut its forecasts for Brazil’s corn crop by 6 mn tons to 137 mn tons and for its soybean crop by 6 mn tons to 177 mn tons. Another 10 mn tons of corn is at risk if El Niño intensifies. Australia’s wheat output could fall to 22 mn tons, from a current forecast of 28 mn tons.

Egypt and Saudi Arabia are exposed on different fronts

Egypt’s summer crops took the hit its wheat avoided. This season’s wheat was insulated by timing, but a 50 kg sack of urea went from around EGP 270 before the war to more than EGP 1.5k. Farmers are shifting toward summer crops that need little synthetic nitrogen, and higher fuel and freight costs point to a bigger import bill. Russia and Ukraine supplied more than 82% of Egypt’s wheat imports in 1H 2026, so Egypt is exposed to Black Sea disruption too.

Both of Saudi Arabia’s sea routes for food are under pressure. Imports cover up to 70-80% of the Kingdom’s food demand, and more than 80% of imported food arrives by sea, through Jeddah and Dammam. Hormuz is disrupted in the east; the Houthis have declared a blockade of Bab Al Mandab since 20 July, and they continue to attack Saudi energy facilities.

Regional importers are buying ahead. Saudi Arabia, Jordan, and Tunisia stepped up precautionary grain purchases earlier this year.

The next planting cycles will show whether the fertilizer shock becomes a harvest shortfall. The first tests come in Brazil and India and in the northern hemisphere’s autumn fertilizer application season, S&P says.