Iranian oil exports skyrocket after sanctions lifted Iranian oil at sea

If the unspoken goal of the war with Iran was to give Russia, and – paradoxically – Iran, much more influence by legitimizing their sanctioned oil exports in a world suddenly facing an energy shortage, then that mission has succeeded.

Just days after the U.S. “temporarily” lifted sanctions on Russian oil in sanctioned tankers, Secretary of State Scott Bessent said Thursday that the Trump administration may also suspend sanctions on Iranian oil already at sea in an effort to reduce energy prices.

“In the coming days we may unsanction Iranian oil that’s on the water, about 140 million barrels,” he said on Fox Business, adding, “In essence, we will be using the Iranian barrels against the Iranians to keep the price down for the next 10 or 14 days, as we continue this campaign.”

It is the government’s latest move to stabilize the oil market against price shocks since the US and Israel launched their joint operation in February. The maneuver could make 140 million barrels of Iranian oil available to the world market, Bessent said.

It is one of several “tools” at the government’s disposal, according to Bessent, as Iranian attacks paralyze the Strait of Hormuz, cutting off about 20 percent of global oil supplies. The government could also make more oil available from the Strategic Petroleum Reserve, Bessent added. The government has already started making 172 million barrels available from the SPR.

“So we have lots of levers, we’ve got plenty more that we can do,” Bessent said. “Some countries are going to do more, the U.S. could unilaterally do another SPR release to keep the price down.”

The White House has discussed adding up to an additional 100 million barrels to the administration’s commitment last week, Politico reported based on a source familiar with the plan.

“Some military advisers are concerned [about] draining so much, and are pushing for more like 50 million barrels on the concern that further destruction of oil and gas infrastructure in the [Middle East] region could leave the country vulnerable from a reserve standpoint,” the source said.

A spokesman for the Department of Energy – which administers the SPR – said in a statement following Bessent’s interview that there are currently no plans for a new release.

“The United States has taken several actions thus far to mitigate disruptions to energy markets,” said Ben Dietderich, spokesman for the Department of Energy. “While the U.S. continues to consider all options to keep markets supplied, there are currently no plans for an additional SPR release.”

Bessent’s comments come a day after the U.S. government announced a 60-day temporary exemption from the Jones Act shipping law, allowing foreign ships to temporarily transport fuel, fertilizer and other goods between U.S. ports.

That makes lifting sanctions on Iranian oil the most likely next step.

The plan is being mooted at a time when a huge price differential of nearly $70 has emerged between oil shipped to Asia via Oman, now trading at $167 a barrel, and WTI, the oil serving the U.S. market and trading at $97. Meanwhile, the Brent oil price, recently trading at $113, is rising and becoming increasingly disconnected from WTI because of fears that the U.S. could ban oil exports, reversing Barack Obama’s 2015 decision and blocking U.S. production.

Global oil market fractures: Asia at $167 (Oman), Europe at $112 (Brent), US at $97 (WTI)

The supply of oil and other products through the strait has plummeted from about 20 million barrels a day to just “a trickle,” the International Energy Agency reported last week. This is the largest supply disruption in history. U.S. gasoline prices have risen more than 85 cents a gallon since the war began. Bessent called the blockade a “temporary bottleneck” and implored U.S. allies to help secure the strait.

“They’re the ones who need this oil,” he said, “The U.S., we’re an oil exporter.”

Although China is particularly dependent on oil from the Gulf region, and has traditionally been its largest consumer, it also has a strategic petroleum reserve that it has been quietly replenishing in recent years. This reserve currently stands at about 1.5 billion barrels, more than the total reserve of 1.2 billion barrels of all IEA member states. The question, then, is whether Beijing is prepared to draw down its reserve as long as Asian oil prices remain high (or perhaps even drop so low that it buys U.S. oil), or whether it will wait for a more strategic moment, such as the invasion of Taiwan, before drawing down its reserves.

Price Crude oil – Brent May 2026 ($/barrel) – weekly cloud candle, logarithmic scale

EU: energy subsidy and electricity tax cut

Written by Evgenia Filimianova via The Epoch Times

The European Union is considering electricity tax cuts and targeted subsidies to protect consumers and industry from sharply rising energy costs amid the ongoing war with Iran, European Commission President Ursula von der Leyen said on March 19.

Speaking after a European Council meeting in Brussels, Von der Leyen said electricity prices are determined by energy costs, network costs, carbon pricing and taxes.

Electricity taxes and charges in the European Union average about 15%, she said, adding that the bloc “will propose to mandate lower tax rates on electricity” and ensure that “electricity is taxed less than fossil fuels.”

“In some cases, electricity is taxed much more than gas – partially up to 15 times more. This cannot be,” Von der Leyen said in a statement.

In the European Union, electricity is taxed primarily through VAT and energy taxation under the Energy Taxation Directive, with additional national levies imposed by individual member states.

According to Eurostat figures from Oct. 29, 2025, average electricity prices for EU households in the first half of 2025 were €28.72 per 100 kilowatt-hours (kWh), almost the same as in the second half of 2024.

Although pre-tax prices declined slightly, the share of taxes and fees increased from 24.7% in the second half of 2024 to 27.6% in the first months of 2025.

Prices varied widely within the EU. Germany had the highest rates for households at €38.35 per 100 kWh, followed by Belgium and Denmark, while Hungary, Malta and Bulgaria had the lowest prices.

Compared to a year earlier, electricity costs rose in Luxembourg, Ireland and Poland, but fell in Slovenia, Finland and Cyprus.

Supply, prices

Von der Leyen said the direct impact of the conflict on Europe manifested itself in higher energy prices rather than disruptions to physical supply. The EU remains diversified in its gas supply, which has helped prevent shortages, Von der Leyen said.

Norway was the bloc’s largest gas supplier in 2025, accounting for 31.1% of imports, followed by the United States with 25.4%, Russia with 13.1% and North Africa with 12.8%, according to the Council of the European Union. The United Kingdom and Azerbaijan had smaller shares.

The EU imported more than 140 billion cubic meters of liquefied natural gas (LNG) last year, nearly 58% of which came from the United States, according to research firm Bruegel. U.S. LNG supplies have tripled since 2021. France, Spain, Italy, the Netherlands and Belgium are the largest importers within the EU.

According to Von der Leyen, energy costs themselves account on average for about 56% of electricity prices.

EU member states already have tools to mitigate these costs through state aid, she said, and the Commission will further relax the rules to allow more support for vulnerable consumers and energy-intensive industries.

Network costs are another major cost and account for about 18% of prices.

The EU is planning legislative changes to improve infrastructure efficiency and possibly reduce charges for heavy industry, Von der Leyen said.

The carbon market under the microscope

CO2 pricing within the EU Emissions Trading System (ETS) is also under review, as leaders look for ways to stabilize energy costs without losing sight of climate goals.

The system requires companies to buy permits for every ton of carbon dioxide they emit.

Von der Leyen said the ETS has helped reduce dependence on imported fossil fuels and spurred investment in cleaner energy, but acknowledges that the volatility of allowance prices has raised concerns among manufacturers.

The commission will propose measures to modernize the system while maintaining environmental goals, von der Leyen said.

EU officials aim to complete the review in July, although member states remain divided over the scope of the reforms. Some governments favor expanding free allowances for industry to protect companies from high energy costs.

Italy’s industry minister, Adolfo Urso, suggests that more drastic measures could be necessary if consensus is not reached. On March 9, he said the suspension of the ETS could serve as an “emergency measure” if reforms cannot be quickly agreed upon.

Urso said industry estimates suggest that abolishing the system could reduce electricity prices by €25 to €30 per megawatt hour.

Price Baseload Electricity supply year 2026 (eur/MWh) – weekly cloud candle, logarithmic scale

US LNG export terminals ‘running near full capacity’ as Middle East energy infrastructure in chaos

Attacks on oil and gas facilities in the Middle East have caused turmoil in global energy markets.

Israel set off the chain reaction with its attack on Iran’s South Pars gas field Wednesday morning, followed by Iranian retaliatory attacks on Qatar’s LNG facility, the Saudi export port in the Red Sea and other targets in the surrounding Gulf states.

This week’s attacks on crucial energy installations in the Middle East, by both Iran and Israel, point to the risk of prolonged power outages and tighter gas markets worldwide.

That’s good news for U.S. LNG exporters along the Gulf of America, where waters remain calm and the risk of major conflict is low.

But as James Bevan, president of Criterion Research , explains below, these U.S. export centers are already running (almost) at full capacity.

The attack

Iranian ballistic missiles struck the industrial city of Ras Laffan in Qatar in two waves within a 12-hour span on March 18 and 19, causing significant damage to both the Shell-QatarEnergy Pearl GTL plant and the LNG complex. The Pearl GTL complex, the world’s largest gas-to-liquids facility with a processing capacity of about 1.6 billion cubic feet of natural gas per day, was hit first Wednesday night. A second wave of missiles hit LNG facilities directly Thursday morning. QatarEnergy confirmed large fires and significant further damage, but did not specify exactly which facilities were affected.

The Qatari Defense Ministry reported that five ballistic missiles were fired at the complex; four were intercepted and the fifth struck a target. There were no casualties and all personnel had been evacuated hours earlier after the Revolutionary Guards Corps (IRGC) issued explicit warnings naming Ras Laffan as one of five energy complexes in Saudi Arabia, the United Arab Emirates and Qatar identified as targets. The fires can be seen on NASA satellite images, confirming the situation on the ground.

The attacks were in retaliation for Israeli attacks on Iran’s South Pars gas field. The Revolutionary Guards named five energy complexes in Saudi Arabia, the United Arab Emirates and Qatar as targets.

What is offline?

Ras Laffan has liquefaction capacity of about 77 million tons per year, about 20% of global LNG production. This capacity had been at a standstill since March 2, when earlier Iranian drone attacks halted production and ushered in force majeure. The market initially viewed the shutdown as temporary. However, the confirmed physical damage from this week’s attacks changes the situation.

American LNG: full throttle into the gap

While about 20% of the global LNG supply in Qatar is out of service or damaged, US export terminals are running at or near their maximum capacity.

According to Criterion Research , total LNG gas supply flows to the U.S. rose to 19.982 million cubic feet per day (MMcf/d) on March 19, a sharp increase from the previous day’s brief decline. The current weekly average of about 19,883 MMcf/d is up from last week’s 19,731 MMcf/d, and projections for future deliveries suggest that supply flows could reach 20,234 MMcf/d in the coming days as commissioning activities at several facilities progress.

The math

The 77 million tons per year that Qatar cannot process amounts to about 10.2 billion cubic feet per day unavailable on the world market. U.S. terminals with a capacity of about 20 billion cubic feet per day cannot physically replace this. No combination of non-Qatari suppliers can.

Goldman Sachs estimated that a one-month break in transit through the Strait of Hormuz could push the TTF price to 74 euros/MWh, the threshold that led to a drop in demand during Europe’s 2022 energy crisis. We are now almost a month into the disruption and the infrastructure damage is increasing. European gas supplies are about 29% full, down more than 20 percentage points year-on-year, and the injection season starts in April. In Asia, Qatar supplied about 53% of India’s LNG imports, 72% of Bangladesh’s and 99% of Pakistan’s.

Price TTF gas delivery year 2026 (eur/MWh) – daily cloud candle, logarithmic scale

“Situation dire”: half of available LNG tankers stuck in Persian Gulf

The global oil tanker fleet consists of thousands of ships, nearly 9,000 by some estimates (and that does not include those under sanctions). Only a fraction of them have to wait to enter or leave the blockaded Strait of Hormuz.

In contrast, the global LNG fleet constitutes only a small portion, and most of it is now tied up in the Persian Gulf.

According to the Wall Street Journal, at least 20 LNG carriers – about half the global fleet – are stuck in the Persian Gulf. Daily freight costs are skyrocketing due to increasing demand from Asia, according to ship brokers. Bloomberg lists the well-known LNG carriers currently passing on their positions:

1. Al Rayyan
2. Al Kharaitiyat
3. Umm Al Amad
4. Lebrethah
5. Gaslog Skagen
6. Sohar Lng
7. Disha
8. Al Daayen
9. Mubaraz
10. Al Sahla
11. Rasheeda
12. Patris
13. Seapeak Bahrain
14. Fuwairit
15. Mihzem
16. Mraikh
17. Al Ghashamiya

Most are located just off the coast of the UAE:

“The situation is dire and will have a lasting impact on the market, regardless of how quickly the conflict ends,” Kostas Karathanos, chief operating officer of Athens-based Gaslog, which operates 34 gas tankers, told The Wall Street Journal.

About 20% of global LNG exports come from the Gulf states. Currently, however, only a handful of ships can pass through the Strait of Hormuz, and production facilities such as QatarEnergy’s have been attacked and have shut down production.

Ship brokers report that the 20 ships stuck in the Persian Gulf make up nearly half of all LNG vessels currently available for charter. Daily rates have risen from less than $98,000 before the start of hostilities with Iran to more than $200,000.

Energy traders expect LNG prices to rise early next week, on top of the 40% increase this week in Asia and Europe. “The effect on LNG shipping will outlast the conflict for a few months,” Karathanos said.

Amid the battle over LNG, more and more ships destined for Europe are being diverted to Asia. According to ship tracking data compiled by Bloomberg, at least nine cargoes initially destined for Europe have changed course to Asia since the fighting began. This trend has accelerated in recent days. The buffer of spare stock is rapidly running out, threatening to lead to increased competition and higher prices in both regions.

Adding to the turmoil is the fact that LNG suppliers, including Shell Plc, are declaring force majeure for customers across Asia because of halted deliveries from the Middle East, according to sources familiar with the matter. This illustrates a growing domino effect in the global gas market.

With virtually no tankers available to carry cargoes, Asian buyers of LNG are preparing for disruptions in supplies due to the war in the Middle East that could last for months, Bloomberg reports.

According to traders familiar with the matter, companies in Thailand want to buy LNG cargoes for delivery through May. Bangladesh has already purchased cargoes for April and is also considering purchasing fuel for delivery starting in May, traders said. Major buyers in Taiwan and South Korea are also preparing to buy more LNG for those two months.

These developments show that Asian importers are not counting on a quick solution in the war between the U.S. and Israel against Iran, and that the production freeze in Qatar, which supplies 20 percent of the world’s LNG, is expected to be prolonged. The longer the plant remains closed, the greater the disruption to supply, since there is no alternative export route for the fuel and no spare capacity available elsewhere to absorb the loss of production.

Companies should make contingency plans to prepare for a 2- to 4-month disruption, argues Dai Jiaquan, chief economist at the CNPC Economics and Technology Research Institute, Thursday at a BloombergNEF summit in Beijing.

Qatar closed its Ras Laffan export facility last week after an Iranian drone attack, disrupting the market and driving up gas prices in Europe and Asia. A number of companies, including Shell Plc, have declared force majeure for their supplies of Qatari LNG to customers in Asia.

At least nine LNG shiploads destined for Europe have been diverted to Asia since the fighting began, according to ship tracking systems from Bloomberg, after Asian buyers offered higher prices than their competitors in Europe.

Meanwhile, Taiwan – which urgently needs LNG for conversion to helium, a crucial component for Taiwan Semi’s chips – has secured alternative LNG supplies for May, cabinet spokesperson Michelle Lee said Thursday at a briefing in Taipei. The island has fully secured supplies for March and April, Lee added.

India, which sources about half of its LNG from Qatar, is making every effort to find alternative sources of supply, traders said. Gail India Ltd. managed to book an LNG cargo for March on Tuesday after several unsuccessful attempts, while other companies are still looking, traders said.

Price ICE LNG April 2026 (usd/MMbtu) – weekly cloud candle, logarithmic scale

Demand for EVs skyrockets in Asia

One of the key findings in global energy markets this week is increasing fragmentation. Brent oil prices in Asia have risen above $150 a barrel, with a decline in demand already evident. China and India are under the most pressure because of their heavy reliance on oil from the Gulf region. Meanwhile, the Trump administration has decided to release barrels from the Strategic Petroleum Reserve to keep the WTI price below $100. The U.S. crude oil price is currently hovering around $94 per barrel.

The Iranian-induced energy shock is hitting Asia the hardest so far because much of the crude oil and LNG is imported there and transported through the Strait of Hormuz.

The current status of the bottleneck at Hormuz…

“The countries that are exposed to that supply disruption are not so much in Europe, or in the Americas, they’re actually really in the Asia region,” Michael Williamson of the United Nations Economic and Social Commission for Asia and the Pacific told AP News.

The energy shock in Asia has had a knock-on effect on economic activity throughout the region. One behavioral change among those who can afford to switch from gasoline cars to electric vehicles has been the surge in activity at Chinese electric car manufacturer BYD Motors.

Bloomberg reports that BYD dealers in the Philippines have already secured orders for an entire month in just two weeks, reflecting consumer reaction to the shock of energy prices and the increased cost of gasoline.

Vietnamese car company VinFast has seen a fourfold increase in showroom visits and sells about 80 electric cars a week, about double the numbers expected in 2025, due to the sharp rise in energy prices. In Thailand, New Zealand and Southeast Asia, dealers are reporting sales increases of 20% or more and even shortages of inventory.

The key point here is that the rapid rise in gasoline and diesel prices in Asia has accelerated the acceptance of electric vehicles in recent weeks, and if the crisis continues, acceptance rates will only increase in the coming weeks and months.

“Higher oil prices always help the transition to electric vehicles,” said Albert Park, chief economist of the Asian Development Bank. “It creates economic incentives to accelerate the green transition.”

Joanna Chen, analyst at Bloomberg Intelligence, noted that affordability and charging have always been obstacles to the EV market. She added: “Outside of China, the upfront price of EVs is still generally more expensive than gasoline cars.”

The shock in energy prices is a welcome development for the global auto industry, which has taken a terrible gamble last year with electric cars. Indeed, the increased demand may help sell off supplies to anxious consumers warned of what could be the biggest energy shock in the modern economy.

Price Emission Rights – December 25 contract EEX (eur /t) – weekly cloud candle, logarithmic scale

US: only 2 months of rare earths still in stock

TheUS military’ sreliance on Chinese rare earths is increasingly emerging as a strategic vulnerability as the conflict between Washington and Iran unfolds and President Donald Trump prepares for a much-discussed visit to Beijing later this month.

US officials and analysts say the war has heightened concerns about supply chains for the specialized minerals used in advanced weapons systems, reports SCMP. According to sources familiar with the issues, the U.S. may only have about two months’ supply of rare earths left. This raises questions about how long current military operations can continue if access to Chinese supplies is disrupted.

As already made clear in 2023, former Raytheon CEO Greg Hayes admitted that Beijing actually controls the U.S. military’s supply chain thanks to its reliance on rare earths and other materials coming from or processed in China.

According to Hayes, Raytheon has “thousands of suppliers in China,” making”disconnection… is impossible.”

“We can de-risk but not decouple,” he tells the Financial Times, adding that he believes this applies” to everyone”.

“Think about the $500bn of trade that goes from China to the US every year. More than 95% of rare earth materials or metals come from, or are processed in, China. There is no alternative ,” continued Hayes, adding, “If we had to pull out of China, it would take us many many many years to re-establish that capability either domestically or in other friendly countries.”

Hayes said at least two years ago that the company “to take some of the most critical components and have second sources but we are not in a position to pull out of China the way we did out of Russia.”

Now concerns about the alleged limited availability of rare earths will play a role in Trump’s planned meeting with Chinese President Xi Jinping, which will take place from March 31 to April 2. Sources aware of the talks say the availability of rare earths could well be the main agenda item during the meeting between the two leaders.

Michael Every of Rabobank draws parallels with the Suez Crisis of 1956, when the United States applied financial pressure to force Britain and France to cease military operations in Egypt. During that period, Washington’s influence was redrawing the geopolitical balance between Western powers.

This is obviously crucial. To continue an analogy from yesterday, will China in 2026 be the US of 1956 and the US in 2026 the UK and France of the Suez crisis? (This is relevant because Germany may emulate Japan by securing supplies of critical minerals through joint sourcing from key companies, with the aim of reducing dependence on China.)

Today, the roles might be reversed. Chinese control of crucial mineral resources increases the likelihood that Beijing can exert similar influence on Washington, just when U.S. military operations and industrial supply chains depend heavily on those materials.

Rare earth metals – particularly the heavier varieties such as dysprosium and terbium – are essential for the production of high-performance permanent magnets, radar systems, missile guidance components and propulsion systems used in modern weapons. China has long dominated global production and processing of these minerals, leaving the U.S. dependent on imports for crucial components of its defense industry.

A report from the US Geological Survey this month shows that between 2021 and 2024, China was responsible for 71% of US imports of rare earths (so clearly less dependent than 2.5 years ago). During that period, China was the sole supplier of certain heavy rare earths, including terbium, with no readily available alternative sources.

Marina Zhang, associate professor at the Australia-China Relations Institute at the University of Technology Sydney, told SCMP that the imbalance will provide Beijing with “significant indirect leverage over the duration and cost of potential conflicts” creating, she said, “asymmetric vulnerability for Washington.” This could allow China to influence geopolitical negotiations by limiting or easing access to materials essential to weapons production.

Zhao Minghao, professor at Fudan University’s Institute of International Studies, said Beijing is likely to pressure the U.S. to ease tariffs and export restrictions in exchange for assurances about a stable supply of rare earths.

The issue has become more urgent as the U.S. military consumes much ammunition in its campaign against Iran, which began on Feb. 28. President Trump initially predicted that the attacks could last four to five weeks, but said Monday that U.S. objectives were nearly achieved and that the crisis could be over “very soon.”

The Washington Post reported, based on anonymous sources within the US government, that the Pentagon consumed about $5.6 billion worth of munitions in the first two days of operations alone. This illustrates the pace at which advanced weapons stockpiles are being phased out.

Although existing missile stockpiles can sustain battles for several more months, replenishing them may prove difficult if access to Chinese minerals is limited, said Amanda van Dyke, founder of the think tank Critical Minerals Hub.

“Missile stockpiles are more than sufficient to sustain the Iran war for at least three to six months” she states. “But restocking those munitions afterward may take much longer without Chinese minerals.”

The Trump administration has tried to mitigate the risk by launching “Project Vault,” a $12 billion public-private initiative aimed at establishing strategic stockpiles of essential minerals. Industry analysts say that while the program may help, it may not meet the specific needs of modern weapon systems.

China has already shown its willingness to use rare earth exports as a means of pressure. In April, Beijing imposed export restrictions on seven medium and heavy rare earths – including dysprosium and terbium – requiring special permits for shipment abroad. The move was a retaliatory measure for U.S. import tariffs introduced as part of Trump’s so-called “Liberation Day” trade measures.

The additional restrictions introduced in October were suspended the following month as part of a temporary trading file, although previous licensing requirements remain in place.

For Washington, however, the interests potentially extend beyond trade. As the conflict in Iran continues and weapons stockpiles dwindle, the availability of rare earths could become an increasingly important factor in both military planning and diplomacy.

Additional charts

Inflation

Energy shock puts fertilizer supply at risk, as does food price hike 2022

The speed of the energy shock is already affecting agricultural markets. The risk of food inflation is likely to increase as secondary effects spread across commodity markets following the chaos in the Middle East. Sharply rising production costs, including diesel for tractors and machinery and natural gas as a key fertilizer feedstock, suggest that global food prices may again show a sharp rise, similar to the food price rise in the early days of Russia’s invasion of Ukraine.

“The speed of the move [energy shock] pushed volatility sharply higher, with energy once again becoming the primary transmission channel for geopolitical risk into broader macro pricing,” writes UBS analyst Claudio Martucci in a note to clients.

Claudio notes,“Agricultural markets reacted more indirectly to the energy shock via higher fertilizer costs, and higher input and biofuel costs lifted soybean oil to two-year highs, while wheat experienced elevated volatility and some profit-taking late in the week despite an otherwise supportive commodity backdrop.”

The energy shock that sent Brent and WTI futures soaring to nearly $120 a barrel early this week has now subsided. The IEA and world leaders are preparing for the release of a record amount from strategic petroleum reserves , which helps keep energy prices down for now. Brent is trading around $92 per barrel and WTI around $87 per barrel.

But the rise in oil and natural gas prices, now that the Strait of Hormuz, the bottleneck for energy supplies, has been severely disrupted for 12 days by Operation Epic Fury, is likely to spill over into broader energy markets and agriculture. This could potentially push up the FAO (UN) World Food Price Index further in the coming months if energy prices remain high, as they did after Russia’s invasion of Ukraine in the first half of 2022.

Source: Energy Shock Threatens Fertilizer Supplies As Echoes Of 2022 Food Price Spike Return by Tyler Durden

Bloomberg macro strategist Simon White warns,“But food prices are likely to be as troublesome for second-round inflationary effects. Less well-known is that the shock to food prices was worse than the oil price shocks in the 1970s, after the Arab oil embargo and the Iranian revolution. Food inflation in the US was already rising before both shocks, and contributed more to headline CPI than energy through almost all of the 70s.”

Source: Energy Shock Threatens Fertilizer Supplies As Echoes Of 2022 Food Price Spike Return by Tyler Durden

What some may not know is that the Strait of Hormuz is also a crucial shipping route for about a third of the world’s fertilizer trade. The security threat remained high Wednesday, with reports of three ships hit by Revolutionary Guard projectiles, insurance costs that had increased 12-fold in some cases over the past week and partial paralysis of shipping traffic through the waterway.

Urea prices have already risen sharply, and the excitement is now spreading to the ammonia, sulfur and phosphate markets.

source: Energy Shock Threatens Fertilizer Supplies As Echoes Of 2022 Food Price Spike Return by Tyler Durden

Wall Street analysts are already warning that the timing is particularly unfavorable because many farmers are at a crucial time when fertilizer must be used. Any shortage or price hike could negatively affect crops and increase food production costs.

“The timing of the crisis is particularly worrying for the agricultural sector. Farmers in several countries are about to begin applying fertilizer for upcoming crop cycles, meaning any supply shock could directly affect crop yields,” said Chris Vlachopoulos of Independent Commodity Intelligence Services.

Vlachopoulos:“The fertilizer market was already under pressure before the Middle East crisis due to gas shortages, export restrictions, and geopolitical tensions affecting key suppliers. The latest conflict could intensify those strains.”

“The uncertainty is also rippling across ammonia, sulfur, and phosphates markets, where trade has slowed, prices are firming, and logistical constraints are forcing buyers to seek alternative suppliers while freight costs and shipping risks continue to rise,” Vlachopoulos added.

Jeff Peterson of Heartland Farm Partners tells the agricultural magazine “Brownfield” that the rise in fertilizer prices may prompt some farmers to revise their crop rotation this year.

Nebraska farmer Clay Govier says he does not expect to change his crop rotation this spring, but will adjust his fertilization plan.

“You can’t even buy fertilizer right now and I think that’s the bigger concern for this coming crop in terms of what we’re going to do for fertility options,” Govier said.

Even if the Hormuz pipeline reopens next week, it could take weeks, and possibly even at least a month, for crude oil and gas processing plants to get back up and running. This suggests that the fertilizer market will remain tight for quite some time. All of this is happening at one of the worst possible times, as the growing season in the Northern Hemisphere will begin in a few weeks.

Our interpretation is that the key signal to keep an eye on is the FAO World Food Price Index relative to Brent oil (or WTI), which is increasingly pointing to a 2022-style price hike. In other words, readers should start thinking more seriously about what would happen if Jared Cohen, President of Global Affairs and Co-Head of the Goldman Sachs Global Institute, is right about the worst-case scenarios in terms of spillovers.

If that scenario occurs, further disruption in energy markets could quickly amplify the inflation shock.

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