A disruption in the Strait of Hormuz is moving beyond energy markets and into global food supply chains, with global brokerage firm Goldman Sachs warning that fertiliser shortages and higher production costs are likely to feed into grain prices.
In a report dated March 24, 2026, the firm said nitrogen fertiliser prices have already risen 40% since the start of the Middle East conflict, and the knock-on effects are likely to intensify. While higher input costs may lift food prices modestly in the near term, Goldman Sachs said the bigger risk comes from reduced crop output, which could drive a more sustained increase in global grain prices.
Goldman Sachs on fertiliser supply through Hormuz
More than a quarter of the global nitrogen fertiliser trade, including urea and ammonia, moves through the Strait of Hormuz each year. Around 20% of liquefied natural gas, which is the main feedstock for producing nitrogen fertilisers, also passes through the same route.
This creates a dual constraint. Any disruption not only restricts fertiliser shipments but also raises production costs globally, since natural gas prices tend to rise when supply routes are threatened.
“Hormuz disruptions both constrain global fertiliser availability and raise fertiliser production costs elsewhere,” Goldman Sachs said.
Even if shipping normalises, supply may remain tight. The report noted that QatarEnergy, which accounts for roughly 10% of global urea trade, halted production at its Ras Laffan complex following a drone attack, while Iran has taken ammonia production offline. Outside the region, spare capacity remains limited, with Russia facing constraints from attacks and export controls, and China is likely to extend its fertiliser export restrictions.
Goldman Sachs on food prices and inflation impact
Higher fertiliser costs typically pass through to food prices over time. Goldman Sachs estimates that fertiliser accounts for about 20% of grain production costs, and a sustained increase could push food prices higher by around 1.5% this year, adding roughly 0.1 percentage points to headline inflation.
However, the firm said cost is not the main driver to watch.
“The largest potential boost to grain prices is more likely to come from reduced grain supply,” Goldman Sachs said.
The report also places this within a broader macro context. Supply disruptions of this nature tend to push inflation higher while weighing on economic growth, creating an unfavourable mix for both bonds and equities.
Goldman Sachs on why supply, not cost, drives grain prices
Fertiliser disruptions affect crop output in two main ways. Farmers may apply less nitrogen or apply it late, which directly affects yields. They may also shift acreage toward crops that require less fertiliser, such as soybeans.
In the United States, timing is critical. Around 50% of nitrogen for corn is applied before planting between March and April, and another 25% after planting between May and June. Delays during these windows can have a direct impact on yields.
This means the effect of current disruptions is not yet fully visible. Fertiliser shipments from the Gulf to the United States typically take about a month, so disruptions to March loadings are likely to affect April availability, just as demand peaks.
Goldman Sachs on corn prices and the supply balance
Goldman Sachs uses a simple corn pricing framework to explain how supply disruptions translate into higher prices.
Corn is produced once a year but consumed throughout the year. Prices adjust to balance total supply and demand over the marketing year, which runs from September to August. A key metric is the ending stocks-to-use ratio, which measures how much inventory remains relative to consumption.
The firm shows that corn prices tend to move inversely with this ratio, with statistical evidence supporting the relationship.
“Fertiliser disruptions may raise corn prices by lowering the ending stocks-to-use ratio through three channels,” Goldman Sachs said.
These channels include lower yields due to sub-optimal fertiliser use, reduced acreage as farmers switch crops, and higher exports as other regions turn to the United States to make up for production shortfalls.
Goldman Sachs on regional exposure and trade flows
The United States is relatively insulated in the early phase of the disruption because many farmers had already secured fertiliser ahead of the planting season. However, this insulation is not complete.
The report noted that the United States has no strategic fertiliser reserves and a limited ability to quickly scale domestic production, even with access to natural gas. As a result, it remains exposed if global supply tightens further.
More vulnerable regions include Europe, Australia, and parts of the Southern Hemisphere, where crop calendars are later, and fertiliser production is more sensitive to natural gas price volatility.
“More exposed regions such as Europe, Australia and the Southern Hemisphere could increase demand for US grain exports if fertiliser disruptions persist,” Goldman Sachs said.
This is likely to push United States grain prices higher even if domestic supply conditions remain relatively stable.
Goldman Sachs on the broader commodity chain reaction
The report makes it clear that the impact extends beyond fertilisers and grains. The Gulf region plays a central role across multiple commodity markets, including energy, aluminium, and key industrial inputs such as sulphur, which is used in producing metals like copper.
Grains then feed into livestock production, creating a chain that links energy markets to food prices.
Roughly 80% of the Bloomberg Commodity Index is directly or indirectly exposed to the Middle East conflict through supply disruptions, Goldman Sachs said.
Conclusion
Goldman Sachs presents the Strait of Hormuz disruption as more than a short-term supply issue. The combination of tighter fertiliser availability, higher input costs, and potential reductions in crop output creates conditions for a broader increase in food prices.
The immediate impact through higher costs may be limited, but the larger risk lies in supply. If fertiliser disruptions persist through key planting and application windows, grain production could fall, tightening global balances and pushing prices higher.
The report also points to a wider pattern of concentrated commodity supply and increasing geopolitical risk, where disruptions in one region can quickly move through multiple markets. In this case, what begins as a bottleneck in a narrow shipping route is already feeding into fertiliser markets and, according to Goldman Sachs, is likely to be reflected in global food prices.
Disclaimer: This article provides factual analysis only and is not, and should not be construed as, an offer, solicitation, or recommendation to buy or sell securities. Investors must conduct their own independent due diligence and seek advice from a SEBI-registered financial advisor.