Ten days into the latest escalation in the Middle East, the long-term impact remains uncertain but the short-term effects are unmistakable.
Maritime traffic through the Strait of Hormuz has been severely impacted, with insurance premiums soaring. Some carriers have suspended activity in the Red Sea due to the threat of Houthi rebels, whom Iran backs. This means longer transit times due to re-routing, leading to delays and higher shipping costs.
Crucially, the strait is a key route for oil and gas shipments – nearly 30% of global oil and 20% of liquified natural gas pass through Hormuz. Most of this is destined for Asian markets, with China, India, Japan, and South Korea the top destinations for crude oil. There isn’t a clear alternative route: Saudi and UAE pipelines could potentially route about 2.6 million barrels per day according to the US Energy Information Administration – but this is far from the 20 million barrels that pass through Hormuz on average.
Disruptions to gas and oil shipments could reverberate upstream. Between 20% to 50% of global fertiliser shipments pass through the strait, leaving the market highly exposed to disruptions. Combined with rising gas prices, the crisis is expected to place renewed pressure on fertiliser producers and push prices higher.
Fertiliser and raw materials flowing through Hormuz
Sulphur (key input for phosphate fertilisers)
~50% of global seaborne sulphur trade originates in the Middle East Gulf.
Volume: ~20 million tonnes per year.
Major destinations: China, Morocco, Tunisia, and mining industries in southern & central Africa.
Urea
Around one third of global seaborne urea trade comes from the Middle East Gulf.
Exports: ~18 million tonnes per year.
Global total: ~56 million tonnes per year.
Major buyers include Brazil, India, Thailand, Australia.
Ammonia
~20% of global seaborne ammonia trade comes from the Middle East Gulf.
Shipments: ~365,000 tonnes per month (≈ 4.4 million tonnes per year).
Main buyers: India (~830,000 t); Morocco (~315,000 t); South Korea (~335,000 t)
Phosphates (MAP & DAP)
20% of global MAP seaborne trade
14% of global DAP seaborne trade
Saudi Arabia (Ma’aden) is the key exporter.
All shipped via Ras al‑Khair, requiring Hormuz transit. India is typically the largest DAP recipient in Q3.
Sulphuric acid (imports into the Gulf)
Saudi Arabia expected to import ~700,000 tonnes of sulphuric acid in 2025 via Ras al‑Khair.
~500,000 tonnes already imported in first seven months (mainly from India and China).
Also reliant on Hormuz.
The same goes for production and manufacturing costs: if the conflict drags on, margins would be squeezed. Inflationary pressure could further dampen already lukewarm consumer sentiment while putting pressure on food and beverage companies to rethink their pricing strategies – potentially delaying price cuts, to the detriment of consumers.
On the other hand, grain markets have held steady so far, with offer prices stable despite an uptick in global wheat prices. The volume of grain passing through Hormuz is also limited – comprising less than 10% of global corn trade while wheat and soybeans are less than 5%, with over half of shipments going to Iran.
The ongoing stalemate has heightened concerns over the region’s food security, given its heavy reliance on imports of key commodities such as meat, dairy, maize, soybeans, vegetable oils and sugar. Dairy supplies are predominantly sourced from Oceania and Europe, while major beef imports come from Brazil, India, Australia and New Zealand.
On the dairy side, New Zealand is the biggest dairy exporter to the Gulf. Almost 70% of its shipments to the region are dairy products. Around 13% of New Zealand’s whole milk powder exports and 10% of its butter go to the Gulf, with the vast majority of these exports destined for Saudi Arabia and the UAE. This points to significant disruption, at least in the short term.
New Zealand is also exposed to fertiliser supply shocks, because over a fifth of its global supply comes from Saudi Arabia – but the NZ government has advised that there are ample domestic supplies to cover the autumn period.
Other major dairy exporters to the Gulf include Ireland, but exports are not being significantly impacted so far, according to trade body Dairy Industry Ireland. More broadly, the region is of increasing importance to Ireland: the country exported food and drink products worth €370 million in 2025, an increase of 7.5%.
“The real challenge at present lies in the mounting pressure on global supply chains and the inevitable spike in shipping and energy costs,” said Conor Mulvihill, director of Dairy Industry Ireland. “We are working closely with government, in the EU and with our members to mitigate these overheads and ensure the continued flow of high-quality Irish nutrition to the region.”
For global dairy players, there’s the added tension of managing price pressures on commodities due to milk production growth that continues to run above historical averages. The situation was expected to normalise during 2026, with the likely rebalancing not expected to happen until the second or third quarter, according to Nate Donnay, Stone X director of dairy market insight.
Dairy companies who have performed well in the market in recent years have leaned heavily on efficiency optimisations – and may need to apply even more stringent discipline to offset input pressures. At the same time, there’s healthy demand for value-added dairy and ingredients, with the industry already actively pivoting towards high-margin commodities and growth niches as a growth strategy.
For now, the biggest risk from the latest Middle East escalation remains upstream - and businesses would be watching closely if the prediction of US president Donald Trump that price hikes would be “a very small price to pay” for reshaping the regional order bears out.
