Fertiliser cargoes in focus as Iran tightens Strait transit rules

Iran's tightening of Strait of Hormuz transit rules in June 2026 — requiring advance permission, political vetting, and designated routes for all commercial ...

What Happened

Iran's tightening of Strait of Hormuz transit rules in June 2026 — requiring advance permission, political vetting, and designated routes for all commercial vessels — brought fertiliser cargo movements through the waterway back into focus as a critical supply chain vulnerability.
At the height of the Strait closure, 16 vessels carrying fertilisers to India were stranded in the Strait, including eight carrying approximately 330,000 metric tonnes of urea, four carrying approximately 257,000 metric tonnes of DAP, and additional vessels carrying 110,000 metric tonnes of sulphur.
Iran's new transit charges of up to USD 2 million per vessel apply to all commercial traffic, including fertiliser carriers, adding substantially to landed import costs.
Approximately one-third of the world's seaborne fertiliser trade — around 16 million tonnes annually — passes through the Strait of Hormuz, making it a chokepoint for global agricultural supply chains as much as for energy.
Global urea prices climbed by approximately USD 200–250 per tonne from pre-conflict levels, reaching approximately USD 700 per tonne.
India has responded by diversifying fertiliser import sources, issuing emergency tenders, and increasing domestic gas allocation to fertiliser plants.

Static Topic Bridges

India's Fertiliser Import Profile

India is one of the world's largest consumers and importers of chemical fertilisers, with urea (a nitrogenous fertiliser, N content ~46%) and DAP (diammonium phosphate, the primary phosphatic fertiliser) being the two most critical inputs for food production. Approximately 70% of India's total urea imports originate from Gulf countries, including Oman, Saudi Arabia, Qatar, and the UAE. Approximately 60% of India's DAP imports come from Saudi Arabia and other Middle Eastern sources. Both products transit the Strait of Hormuz when shipped from Gulf production hubs.

India's total fertiliser requirement for Kharif 2026 was assessed at 383.9 lakh tonnes, against which stocks were 197.56 lakh tonnes as of mid-2026.
Urea availability reached 235.33 lakh metric tonnes (LMT) against a requirement of 183.51 LMT, providing a buffer of approximately 49 LMT in closing stocks for the Rabi 2025-26 period.
India's urea imports come from a widening set of countries — Oman, Malaysia, Vietnam, Georgia, Nigeria, and Russia — as part of emergency diversification.
National Fertilizers Limited (NFL) received bids for more than 6 million tonnes of urea against a tender for 1.7 million tonnes, reflecting aggressive global procurement.

Connection to this news: India's heavy reliance on Gulf-origin urea and DAP means that every tightening of Strait transit rules, every increment in toll charges, and every vessel stranded in the Strait translates directly into potential shortfalls and price pressures for the kharif and rabi sowing seasons.

India's Fertiliser Subsidy Architecture

Urea is India's most widely used nitrogenous fertiliser and is a fully price-controlled commodity. The government sets the maximum retail price (MRP) for urea — currently Rs. 266–276 per 45-kg bag — and absorbs the entire gap between that price and the actual cost of production or import through the fertiliser subsidy. This means that any rise in global urea import prices is borne entirely by the Union Budget rather than passed on to farmers, insulating agricultural input costs from external shocks but creating fiscal pressure. The Union Cabinet approved Rs. 41,533.81 crore in Nutrient Based Subsidy (NBS) rates for Kharif 2026 (April 1–September 30, 2026), an increase of Rs. 4,317 crore over Kharif 2025.

Urea subsidy alone accounts for approximately Rs. 70,000–80,000 crore annually in the Union Budget under normal global price conditions.
The Nutrient Based Subsidy (NBS) scheme, introduced in 2010, covers phosphatic and potassic (P&K) fertilisers including DAP; urea is kept outside NBS under direct price control.
Rising global DAP and urea prices due to Strait disruption would require supplementary budget allocations to maintain the price cap.
The Ministry of Petroleum and Natural Gas increased gas allocation to domestic fertiliser plants to approximately 98% of their six-month average consumption to partially substitute imports.

Connection to this news: Iran's transit fee regime and vetting requirements raise the effective landed cost of imported urea and DAP. Since MRP is fixed by the government, the full cost escalation flows into the subsidy bill, creating a direct fiscal implication for India from every USD added to per-tonne import costs.

Fertilisers as a Strategic Commodity: UNCTAD and Global Supply Chain Risk

The United Nations Conference on Trade and Development (UNCTAD) has warned of a "fertiliser shock" stemming from Strait of Hormuz shipping disruptions, noting that approximately one-third of global seaborne fertiliser trade — around 16 million tonnes annually — transits the Strait. Fertiliser price spikes cascade into food price inflation within 6–12 months, as higher input costs either reduce application rates (cutting yields) or raise farmgate costs. This creates an asymmetric risk for import-dependent developing countries, including India, whose agrarian economies are more sensitive to fertiliser price volatility than advanced industrial ones.

The Persian Gulf region is home to some of the world's largest urea and DAP production complexes, including in Saudi Arabia (Sabic, Ma'aden), Qatar (Qafco), and Oman (Oman India Fertiliser Company, OMIFCO — a joint venture in which India holds a 25% equity stake).
OMIFCO at Sur, Oman, is a strategic asset: it produces approximately 1.65 million tonnes of urea per annum, with preferential offtake agreements for India through RCF and NFL, providing a degree of supply security even during transit disruptions.
Globally, the Arabian Gulf and surrounding regions account for approximately 25–30% of total world fertiliser export capacity.

Connection to this news: Iran's new transit control regime — requiring ship-by-ship permission — creates uncertainty even for vessels that eventually obtain clearance, as the approval timeline is unpredictable. This uncertainty itself disrupts procurement planning for fertiliser companies and state importers.

Food Security Linkage: Fertiliser to Farmgate

India's food security architecture rests on adequate fertiliser availability at affordable prices during the two critical sowing windows: Kharif (June–July sowing, with urea peaks in July–August) and Rabi (October–November sowing). Any supply crunch arriving six to eight weeks before peak sowing creates disproportionate shortfalls because the buffer window for emergency procurement and shipping is narrow. The government's fertiliser security policy is operationalised through the Fertiliser Ministry's allocation system, which assigns fertiliser volumes to states monthly and distributes through cooperative and private dealer networks.

India produces approximately 25–26 million tonnes of urea domestically, against a total annual requirement of approximately 33–35 million tonnes; the gap of approximately 7–9 million tonnes is met through imports.
India does not produce DAP domestically at scale; virtually all DAP is imported (approximately 6–8 million tonnes per year).
Rabi season accounts for approximately 40% of annual fertiliser consumption in India; Kharif accounts for approximately 60%.
Food price inflation arising from fertiliser shortfalls creates a monetary policy challenge, as the Reserve Bank of India's inflation targeting framework includes food in the CPI basket with a weight of approximately 46%.

Connection to this news: The stranding of 16 fertiliser-laden vessels in the Strait, combined with new vetting-and-toll requirements, compresses the effective procurement window for India's fertiliser agencies ahead of the Kharif 2026 sowing season, with downstream implications for agricultural output and food price stability.

Key Facts & Data

Approximately one-third of global seaborne fertiliser trade (~16 million tonnes/year) passes through the Strait of Hormuz.
16 vessels carrying fertilisers to India were stranded at the height of the Strait closure: ~330,000 MT urea, ~257,000 MT DAP, ~110,000 MT sulphur.
Global urea prices rose by approximately USD 200–250/tonne from pre-conflict levels, reaching ~USD 700/tonne.
Iran's new transit fees reach up to USD 2 million per vessel.
India's kharif 2026 fertiliser requirement: 383.9 lakh tonnes; stocks: 197.56 lakh tonnes.
Urea MRP fixed at Rs. 266–276 per 45-kg bag; subsidy burden ~Rs. 70,000–80,000 crore/year under normal conditions.
NBS allocation for Kharif 2026: Rs. 41,533.81 crore — up Rs. 4,317 crore from Kharif 2025.
OMIFCO (Sur, Oman) — India holds 25% equity — produces ~1.65 million tonnes of urea per annum for preferential supply to India.
Domestic gas allocation to fertiliser plants raised to ~98% of six-month average consumption to reduce import dependence.