OPINION: Conflicts expose vulnerabilities in inputs and redraw geopolitical pressures on agriculture

The Middle East once again occupied the center of global geopolitical attention between May and June 2025, when the escalation between Iran and Israel evolved into an open confrontation, with coordinated attacks and direct threats to the safety of navigation in the Strait of Hormuz. Despite the ceasefire announced in July through multilateral diplomatic efforts, the logistical risk has not yet been completely dissipated. Analysts warn that tensions persist around the Gulf, maintaining a high level of uncertainty in international markets. The inflection point, however, becomes even more relevant when considering the impact of this scenario on countries structurally exposed to logistical instability in the region. Brazil, highly dependent on imported nitrogen fertilizers, much of which flow through routes that pass through the Persian Gulf, appears among the most vulnerable to the commercial consequences of the war.

As the situation escalated, the United States intensified its military presence in the region, deploying ships and reinforcing its rhetoric of concern for regional stability and support for Israel. As a result, Iran began explicitly threatening to disrupt traffic in the Strait of Hormuz, through which between 20% and 30% of all seaborne oil exports and, less commented on, a critical fraction of the global nitrogen fertilizer trade passes. According to data compiled by Rabobank[1], approximately 45% of global urea exports pass directly or indirectly through this route, with emphasis on Iran (5,5 million tons per year), Qatar (5 million), the United Arab Emirates (2 million), Bahrain, Oman (3 million), and Saudi Arabia (east coast). Furthermore, around 25% of ammonia, 20% of diammonium phosphate (DAP), 10% of monoammonium phosphate (MAP) and almost 30% of global sulfur also circulate through the Persian Gulf routes, reinforcing the region's strategic logistical role for global food security.

Although a complete closure of the strait is unlikely for technical, diplomatic, and economic reasons, unlike previous episodes, this time the threat was not seen as isolated rhetoric. In the weeks following the attack, the combination of troop movements, belligerent rhetoric, and localized attacks in the Persian Gulf was enough to trigger alarm bells in global markets. The mere risk of disruption imposed a "war premium" on shipping and insurance. At the end of June, the price of a barrel of Brent crude oil rose[2] by more than 7% in just a few hours, reflecting the markets' sensitivity to any instability in that 21-nautical-mile strip connecting the Persian Gulf to the Indian Ocean. At the same time, urea production was temporarily halted in both Iran and Egypt, further increasing supply shortages and putting pressure on international prices.

Geopolitical tension then turns into concrete economic disruption, rekindling warnings of inflation and logistical insecurity in global supply chains[3], especially those dependent on energy inputs, nitrogen fertilizers, and regular maritime transport. Here, we begin to understand the true weight of the situation. Although the epicenter of the conflict is thousands of kilometers from Brazil, the national agricultural sector has already begun to show signs of concern or to pay closer attention to the situation. One of the markets that reacted most strongly was the fertilizer sector.

Brazil, structurally dependent on nitrogen fertilizers, is among the countries most vulnerable to this scenario. We import over 90% of our urea consumption, 17% of which comes directly from Iran, and our purchases are concentrated between June and November, at the peak of summer harvest preparation. This seasonality means that logistical shocks in the Gulf have immediate effects on the domestic market. Also according to Taylor and Fonseca (2025), authors of the Rabobank article, the risk of a complete disruption in the Strait of Hormuz could increase urea prices in Brazil by over 100% in the next three months if the crisis worsens. Even in the scenario of a partial disruption, the expectation would be for an increase of up to 35% in the quarter, which would directly affect the planning and profitability of the next harvest. The gravity of the situation lies not only in the rise in prices, but in the type of vulnerability it exposes: that of Brazilian agriculture as a logistical hostage to a single, highly concentrated and geographically unstable route.

Fertilizers: the most exposed link in Brazilian dependence

The abrupt increase in the price of urea, observed in the days following the attacks, was only the first visible symptom of a deeper problem. If oil volatility puts pressure on logistics and freight costs, the instability in the supply of nitrogen fertilizers directly affects the heart of Brazil's agricultural strategy: the ability to plan and execute a harvest with predictability, scale, and security. In other words, the war between Iran and Israel represents not only a momentary price shock, but also has a high chance of exposing a weak and still unresolved link in national agricultural policy. The following figure helps visualize this vulnerability by showing the deficit in the nitrogen fertilizer balance by country. Brazil is among the most exposed in the world, alongside major importers such as India and Australia, highlighting the urgency of reducing external dependence on strategic inputs.

Figure 1 – Global dependence on the trade balance of nitrogen fertilizers[4]

Prepared by: RaboResearch (2025), based on data from the International Fertilizer Association (IFA) and CRU Group.

Since then, the situation has worsened. The StoneX consultancy[5] confirmed the halt in urea production at units in Iran and Egypt, putting pressure on supply and causing international prices to rise by 20% to 40% in just a few days. The dependence on imported urea, which, as already indicated, is absolute, is not a cyclical issue, but rather a structural one. Brazil has internalized a production model highly intensive in external inputs, especially nitrogen and phosphate, whose supply chains are largely directly influenced by unstable geopolitical contexts. José Carlos Polidoro, a researcher at Embrapa Soils, emphasized that Brazil is highly exposed to any "hiccup" in global geopolitical stability. The image is accurate, and the Persian Gulf case illustrates the point. Iran and Oman, both directly implicated in the conflict, are among Brazil's main urea suppliers. What would happen if this route were indeed interrupted tomorrow?

What makes this episode even more sensitive is its timing. The escalation in the Middle East coincided with the decisive moment in determining purchases for the 2025/26 harvest. In several producing regions, between 30% and 40% of fertilizer volumes were still outstanding when prices began to rise, according to Argus data[6]. And, in a market where input costs can account for more than 30% of the total production cost for crops like corn and wheat, as indicated by a study[7] by the Consultative Group on International Agricultural Research (CGIAR), this type of fluctuation has the potential to directly impact producers' margins and, consequently, food price formation.

More than just increasing the price of inputs, the crisis is compromising logistical predictability, and it's this combination that's worrying the sector. In a country where the field application window is narrow and strictly dependent on rainfall patterns, delays of even a few weeks can have disproportionate effects on crop performance. Furthermore, fears that new embargoes, attacks, or sanctions will worsen future availability are leading many importers to postpone decisions or pass on uncertainty to subsequent links in the supply chain.

Here, it's important to understand that the problem of external dependence for fertilizers is not the result of recent negligence or a drifting agroindustrial project. Since 2022, when the outbreak of war between Russia and Ukraine disrupted global flows of potassium and nitrogen, the issue of autonomous input production has taken center stage in public policymaking. The most robust institutional response came the following year, with the launch of the National Fertilizer Plan 2022–2050 (PNF), a coordinated effort between the federal government, the production sector, and research institutions to design a long-term strategy capable of reducing external dependence and reactivating national production capacity.

The plan establishes ambitious guidelines, with targets for expanding installed capacity for strategic nutrients and a forecast for a significant increase in the production of organominerals, remineralizers, and other alternative sources. Furthermore, other recent government initiatives have also pointed toward greater autonomy in input production, such as the National Bioinputs Program[8], launched in 2020 and reinforced in 2022, which discusses a mechanism to encourage the development and use of biological inputs, and the regulatory framework for bioinputs, sanctioned in December 2024 (Law No. 15.070/2024)[9], which established specific categories for biofertilizers, biostimulants, and inoculants, facilitating registration and increasing legal certainty for investors in the sector. However, as is often the case with long-term industrial policies, the transition from diagnosis to concrete implementation has been slow. To date, more than ten fertilizer plant projects remain on hold, awaiting clearer regulatory frameworks, signs of institutional stability, and the reduction of bureaucratic obstacles to attract private capital. In other words, even if we were inclined to skip steps and discuss solutions before exhausting the diagnosis of the most recent problem, we could confidently state that the PNF alone will not work miracles. For the plan to fulfill its expected strategic role, a coordinated effort across different fronts will be necessary, such as investments in infrastructure, legal certainty, encouragement of technological innovation, and coordination between federative entities.

This gap between intention and execution becomes even more evident when we look at recent market movements. According to the Agro Mensal bulletin[10] of June 2025, prepared by the Itaú BBA team, fertilizer prices at Brazilian ports had already been showing an upward trend even before the most critical developments in the conflict, with urea registering a 7,5% increase (from US$ 367/t to US$ 395/t), Monoammonium Phosphate (MAP) with a 3,2% increase (from US$ 700,8/t to US$ 722,5/t) and Potassium Chloride (KCl) with a variation of approximately 2,5% (from US$ 360/t to US$ 365/t.)[11] In parallel, Yara International, the largest global fertilizer manufacturer, warned that prolonged tensions in the Strait of Hormuz could trigger a global “food price shock”[12], mainly affecting countries highly dependent on food imports. nitrogen inputs, such as Brazil. With the intensification of tensions in the Gulf, the report warns of a growing "geopolitical risk premium" on nitrogen fertilizers, especially those shipped from Iran, Qatar, and the United Arab Emirates, countries directly involved in Brazil's supply chain. The report also highlights the deterioration of the urea-corn barter ratio in the country, caused by the appreciation of fertilizers combined with the decline in corn prices. This indicates that the impact of the conflict could extend beyond the current harvest and put pressure on costs in the 2026 second crop, further affecting decision-making on farms. According to CNN Brasil, this has already caused Brazilian farmers' purchasing power to reach its lowest level in 30 months, with the barter ratio between MAP and soybeans falling from 28 to 31 bags per ton, putting pressure on margins and increasing risks for the next harvest.

The repetition of these shocks, at increasingly shorter intervals, sends a clear signal that it's no longer a matter of responding to emergencies, but of structurally rethinking the foundations of Brazil's input policy, understanding that public policies focused on agriculture are also increasingly the flagship of how we design our foreign policy. And this requires more than just specific measures; it requires a horizon of decisions anchored in a national development project, involving federative coordination, a robust industrial policy, and, above all, the internalization of the idea that food security depends, above all, on considering national sovereignty in logistics and technology for fertilizer production.

*The text above is an “opinion” text, which is the responsibility of its authors and does not necessarily reflect research or opinions of Insper Agro Global.

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[4] In green, the countries with the largest production surplus; in red, the countries with the largest deficit, in volume.
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