Hormuz shipping crisis still crimping global trade, fertilizer supply at risk

Shipping traffic through the Strait of Hormuz remains far below pre-war levels four months after the United States and Israel launched strikes on Iran, and analysts warn that continued disruption could tighten global fertilizer supplies and push up food prices in import-dependent regions.

The Strait of Hormuz is one of the world's most critical maritime chokepoints. Around 20 percent of the world's seaborne oil trade and roughly a fifth of global liquefied natural gas exports normally pass through the waterway, which separates Iran from Oman and the United Arab Emirates.

Traffic through the strait collapsed after the United States and Israel launched coordinated strikes on Iran on February 28. Iran responded by declaring the strait closed, attacking commercial vessels and warning ships against transiting without its permission. Daily crossings fell from around 100 ships in February to as few as five or six a day in early March, according to IMF PortWatch data cited by Statista.

The United States and Iran signed a memorandum of understanding on June 17 that called for commercial traffic in the strait to resume immediately. Traffic has picked up since then but remains well short of normal. Crossings were running at roughly 34 to 40 ships a day in late June, according to tracking cited by CNN, still far below the pre-war average. The Joint Maritime Information Center this week raised the security threat level for the strait to "substantial," citing continued mine risk and ongoing clearance operations.

Talks between the two sides are continuing in Doha. Iranian officials have repeatedly warned that any attempt to bypass shipping routes agreed with Tehran would delay a full reopening. The United Arab Emirates' state oil company has estimated that full flows through Hormuz may not resume until 2027 even if a deal is reached quickly.

Fertilizer supply risk

Beyond oil and gas, analysts have flagged fertilizer supply as a secondary risk from the crisis. According to an analysis by shipping services company Signal Group, around 20 percent of global seaborne fertilizer exports originate from the Arabian Gulf. The dependency is sharper for urea, the most widely used nitrogen fertilizer, with roughly 46 percent of global trade in the product linked to Gulf producers.

Those exports go mainly to a small number of large agricultural markets. India accounts for about 18 percent of the trade, followed by Brazil at 10 percent and China at 8 percent. Morocco, the United States, Australia and Indonesia each receive between 6 and 8 percent.

Dutch bank ING said in a note cited by Statista that a prolonged disruption would tighten fertilizer availability in import-dependent regions including Brazil, India, South Asia and parts of the European Union. Higher fertilizer and energy costs could feed into higher food production costs, with countries that already have fragile food security systems, particularly in parts of Africa and South Asia, most exposed to a resulting food price shock.

Wider trade impact

The crisis has also pushed some shipping lines to reroute cargo around Africa's Cape of Good Hope to avoid both the Strait of Hormuz and the Red Sea, where Yemen's Houthi movement has threatened commercial vessels. The longer route adds weeks to transit times and has raised freight and insurance costs across global shipping.

War-risk insurance premiums for vessels transiting the strait rose sharply after the conflict began, from around 0.125 percent of a ship's insured value per transit to between 0.2 and 0.4 percent, according to the US Congressional Research Service. For a very large crude carrier, that translates to an added cost of roughly a quarter of a million dollars per transit.

Relevance for the Maldives

The Maldives imports nearly all of its fuel and a large share of its food supply by sea, making it exposed to global shipping and freight cost swings even though it is not a major destination for Gulf fertilizer exports. Sustained disruption to Gulf shipping lanes has already been linked to higher fuel and freight costs affecting import-dependent economies in South Asia, a category that includes the Maldives. MBR has not identified an official government or MMA assessment quantifying direct cost impacts on the Maldives from the Hormuz crisis, and any such figures should be sought from the Ministry of Finance or the Maldives Monetary Authority before being reported as fact.