The Strait of Hormuz carries oil. Everyone knows that. What fewer people track is that it also carries roughly a third of the world’s urea, the fertilizer that feeds half the planet’s crops. When US-Israel strikes on Iran began on February 28, 2026, and Iran effectively closed the strait, it didn’t just rattle crude prices. It set off a slow-motion shock through global food supply chains, one that India, the world’s most fertilizer-exposed large economy, is sitting directly in the path of.
1. The urea price shock, how bad, how fast
2. Why India’s exposure is the sharpest in the world
3. Food inflation: already baked in, and rising
4. The rice paradox: oversupply on the shelf, groundwater in the red
5. 2026: the strongest case yet to rewire India’s crop pattern
1. The urea price shock: how bad, how fast
Within 48 hours of the first strikes, global fertilizer markets cracked open. Granular urea in Egypt, the benchmark for nitrogen fertilizers, leapt from $400–490 per metric ton to around $700. That is a 49–50% surge. Ammonia followed, up 20%. Phosphate prices climbed. Sulfur, of which the Gulf supplies nearly 50% of globally traded volumes, tightened further.
The reason is structural, not incidental. The Middle East accounts for 36% of global urea exports, 25% of ammonia, and 20% of phosphate trade. Saudi Arabia, Kuwait, Qatar, Iran, and the UAE are not minor players, together they are the nitrogen backbone of global agriculture. Qatar’s energy giant QatarEnergy halted downstream urea production after suspending LNG output. China, the world’s largest urea producer, simultaneously tightened export quotas to protect domestic spring planting. Two of the biggest urea suppliers effectively went offline at the same moment.
Rabobank’s urea affordability index, which measures how affordable fertilizer is relative to what farmers earn from crops, hit its lowest point in 18 years.
“Almost 50% of all globally traded sulfur comes from that region. For urea, it’s around a third of all globally traded urea. It’s huge, and more significant in some ways than the impact of Ukraine because it is affecting multiple producers.”
– Natalie Marlow, CRU Group -March 2026
2. Why India’s exposure is the sharpest in the world
Rabobank’s analysts put India, Pakistan, and Bangladesh in the same bracket: the countries most directly in the line of fire. For India specifically, the vulnerability runs three layers deep.
India took the unusual step of formally requesting China to ease its urea export restrictions, a rare admission of how acute the shortage has become. The monsoon planting season begins in June, and fertilizer procurement peaks between April and June. The disruption landed at the worst possible moment on the agricultural calendar.
3. Food inflation: already baked in, and rising
The USDA’s Economic Research Service had projected food prices to rise 3.6% across 2026, higher than the 2024–25 rate, even before the war. The conflict has made that projection look optimistic.
The logic is direct: urea is not a niche input. It underpins the production
of maize, wheat, rice, rapeseed, and most fruits and vegetables. When nitrogen fertilizer becomes unaffordable, farmers plant less or apply less per acre. Both outcomes hit yields. Lower yields, rising energy costs, and supply chain friction compound into grocery-shelf prices.
American corn and wheat farmers are already reducing their planted area by 3% this year. When grain prices rise, meat and dairy follow, since grain is what animals eat. For India, the squeeze is hitting both sides at once, costlier inputs and rising food prices.
“If agricultural yields were impacted by 5% this year, I don’t think we’ll be looking at starvation, but it would certainly cause food inflation, with emerging market countries more likely to feel the brunt of the impact.”
– Heyl, Ninety One -CNBC, March 2026
4. The rice paradox: a warehouse full, groundwater in the red
Here is the contradiction at the centre of Indian agriculture right now. India is sitting on a rice mountain it doesn’t need, grown using a water supply it cannot replenish, in a year when the fertilizer to grow the next crop has become unaffordable.
India is now the world’s largest rice producer, having overtaken China in 2025, accounting for 40% of global rice exports. Prices for Indian rice are expected to fall a further 10–15% due to this glut. Thailand, Vietnam, Pakistan, and Myanmar have been pushed into a race to the bottom on price.
The water cost of this surplus is staggering. Producing 1 kg of rice requires 800–5,000 litres of water, averaging around 2,500 litres. Punjab and Haryana, India’s rice heartland, are extracting 35–57% more groundwater annually than their underground water reserves can naturally replenish. Government data for 2024–25 classifies large zones of both states as either “over-exploited” or at “critical” levels.
India is, in effect, effectively selling water to the world at zero cost, selling a crop below its true cost while depleting a resource that takes centuries to recover.
5. 2026: the strongest case yet to rewire India’s crop pattern
Every few years, someone in Indian agriculture policy makes the argument that farmers in Punjab and Haryana should diversify away from rice and wheat. The argument is always correct. It is also always ignored, partly because MSP guarantees make paddy the safest bet for farmers, partly because market infrastructure for alternatives isn’t ready, and partly because the political economy of the Punjab farmer is too combustible to touch.
The 2026 crisis changes that calculus in a way no policy paper ever could. The fertilizer to grow rice is now 50% more expensive because of a war India had no hand in. The underground water reserves to sustain it are running out. The selling price is falling. And government warehouses are already overflowing.
Meanwhile, maize, millets, pulses, and oilseeds present a compelling alternative profile. Maize requires roughly 1,000 litres of water per kg — less than half of rice’s average. Millets like jowar and bajra require 500–800 litres. Pulses and oilseeds are less nitrogen-intensive, meaning they are partly insulated from the urea shock. They also address India’s chronic import dependence on edible oils and protein.
Punjab already ran a small pilot in 2025: ₹17,500 per hectare to incentivise paddy-to-maize conversion across 12,000 hectares in six districts. The numbers are tiny relative to Punjab’s 3 million hectares under paddy. But the signal matters.
“The argument is not that India should stop growing rice. The argument is that the current pattern, producing 8 times the buffer stock, using groundwater at 1.5 times replenishment rate, at input costs made volatile by a single maritime chokepoint, is a fragility that geopolitics has now made visible in ways a drought never quite did.”
What This Means for You
Your grocery bill is going to feel this before the year is out. The items that move first will be the ones most dependent on fertilizer: wheat, cooking oil, corn-fed dairy and poultry. Rice will be the odd one out, staying flat or dipping because India has far too much of it in storage. But a cheaper bag of rice offers little comfort when oil, lentils, and vegetables are all climbing at once.
For those with money in markets, the picture splits cleanly. Fertilizer companies that depend on imported gas are under real and lasting pressure, their raw material just got dramatically more expensive. On the other side, businesses in the supply chain of crops that benefit from a shift away from riceprocessing millets, trading lentils, storing oilseeds, are looking at a demand shift that could run for years. The early movers in that chain tend to capture the most value.
If you own farmland in northern India, the economics of what you grow are changing in ways the government-guaranteed price for rice may not cover. Input costs are rising sharply and are unlikely to fully reverse even after the war ends. Those who move early toward crops that need less water and less chemical fertilizer will face lower costs and find themselves better placed as policy shifts in that direction.
What this moment reveals is a fragility that few people talk about: a single narrow shipping lane in the Middle East sits between Indian farmers and the fertilizer that feeds the country. That risk does not disappear when this conflict ends. It is a permanent structural weakness. Those who understand it earliest will be the best placed to navigate what comes next.
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