Oil and LNG Prioritized in Strait of Hormuz: Fertilizer Supplies Face Delays

The interim peace agreement reached between the United States and Iran marks a new chapter for global trade routes, facilitating the reopening of the critical Strait of Hormuz after months of closure. However, a full normalization of transit through the strait, particularly for non-oil products, may not occur immediately. Market experts anticipate that crude oil and liquefied natural gas (LNG) tankers will receive priority in transits, leaving shipments of essential commodities like fertilizer potentially stranded.

Since late February 2026, the Strait of Hormuz had been largely blocked following U.S. and Israeli strikes on Iran and subsequent Iranian retaliations and restrictions. This escalation of geopolitical tensions significantly disrupted global energy and supply chains. The interim deal, announced around June 15 and expected to be formally signed on June 19, involves a cessation of hostilities, the reopening of Hormuz, and potential relief from oil sanctions on Iran. Nevertheless, the presence of mines in the strait and ongoing security concerns mean that a full return to normalcy will take time.

Despite the agreement, maritime traffic in the strait remains uneven, with limited visibility into vessel movements. Data from maritime analytics platform MarineTraffic indicates that out of 29 verified crossings between June 10-14, most were eastbound, and over 60% operated on “Dark” or “Unknown” routes. With hundreds of vessels awaiting transit in the region, more than 40 ships laden with fertilizer are currently in queue, according to tanker-tracking data compiled by Bloomberg and Kpler. This highlights the persistent logistical challenges even with the strait's reopening.

The Strait of Hormuz is a vital artery for global energy markets, handling approximately one-fifth of the world's oil and LNG supply. Additionally, the Gulf region hosts some of the world's largest fertilizer plants, with the strait facilitating about one-third of the global urea trade. Months of disruption led to tighter oil and gas supplies, driving up prices, freight rates, and insurance premiums. While Brent crude prices have retreated to around $80 per barrel following the deal news, market uncertainty persists. As Alexis Ellender, senior dry bulk lead at Kpler, noted, “When it comes to moving ships through the Strait of Hormuz, it's going to be oil tankers and LNG carriers that are top of the list once we get towards a more normal flow of traffic. Fertilizer is not as high a priority.”

This development underscores the critical role of the Strait of Hormuz as a global supply chain chokepoint and its importance for energy security. Asian economies are particularly reliant on this passage, as over 80% of the oil transiting Hormuz is destined for the continent. The interim agreement is a preliminary step, initiating a 60-day negotiation period for broader issues such as Iran's nuclear program. Israel's distancing itself from certain aspects of the deal further highlights the fragile geopolitical context in the region.

Market observers anticipate a gradual movement of crop nutrients. The prediction market Kalshi estimates a 51% probability of traffic returning to normal by August 1 and 68% by September 1. The shipping industry seeks unambiguous assurances that hostilities have truly ceased, while crucial questions regarding the regulation of traffic and potential remaining restrictions in the strait still await answers. This indicates that global trade and commodity markets will continue to closely monitor developments in the Strait of Hormuz in the coming period.