Iran Conflict Increases Natural Gas, Fertilizer, Food Prices

The Iran war is threatening international food security as production costs jump and vital export routes are severed. A supply squeeze on fertilizer has caused farmers' affordability to reach a four-year low, according to a World Bank report. The surge in fertilizer costs is primarily driven by a spike in natural gas prices.

European agriculture ministers are calling for urgent intervention to prevent a prolonged food price crisis and to safeguard grain harvests for the 2026 season. Natural gas serves as the primary feedstock for nitrogen-based fertilisers, translating energy market volatility directly into higher costs for farmers.

The World Bank's latest assessment highlights that the surge in fuel and power prices, compounded by the halt of regional exports, is creating an unsustainable environment for global producers.

EU nitrogen fertiliser production is primarily based on natural gas, and the spike in natural gas costs will have an impact on fertilizer production costs, according to Fertilisers Europe. "Fertilisers are energy, so when energy costs rise, automatically fertiliser costs rise," a spokesperson for Fertilisers Europe stated. Europe is not currently facing a fertiliser supply issue.

"Europe is not facing a supply issue for the current season given the relatively high output of European production which satisfies around 70% of European demand as well as record high import levels in Q4 2025," the spokesperson for Fertilisers Europe said.

"However, farmers are operating in a complex environment and facing tight margins. " An official at CropLife Europe emphasized the need for resilience in the face of global shocks.

"Food security depends on resilience which means ensuring farmers have timely access to all the tools they need to protect crops and manage risk, even in periods of volatility," the official stated. European farmers already face significant economic and regulatory pressure, with the current crisis adding to those challenges.

A severe and accelerating fertilizer crisis is hitting Asia and the Global South, with significant shortages triggered by shipping disruptions in the Strait of Hormuz, according to the Food and Agriculture Organisation of the United Nations (FAO).

The hardest-hit regions include India, Bangladesh, Sri Lanka, Egypt, Sudan and various parts of Sub-Saharan Africa, which are seeing elevated costs, reduced availability, and looming food insecurity. The Food Price Index released by FAO has begun to surge in reaction to mounting pressures.

The reduction in fertiliser application today could lead to lower harvests in the coming seasons, the World Bank report notes.

In emerging economies grappling with high inflation, rising transport expenses and complex logistics in conflict zones are pushing food prices beyond current levels. For many of these regions, the developments may necessitate a tightening of monetary policy to prevent broader economic instability.