Urea Prices Drop 50% as Traders Factor in Middle East Supply Unwind

In early June, urea prices collapsed by half, sliding from a peak of $918 a tonne in April to $475 a tonne. The fall follows a period of heightened volatility that began when the Strait of Hormuz was closed amid the 2026 Iran‑U.S. conflict.

The sharp decline reflects traders’ growing confidence that Gulf exports are on the mend and that China will resume its long‑halted supply. The price slide started even before the U.S.–Iran peace deal was announced, indicating that market sentiment around Gulf shipments had already begun to improve.

Seasonal demand has also eased, and the expectation that China will export from 1 June has reinforced the downward pressure. "Urea markets rose the fastest and sharpest following the closure of the Strait of Hormuz and have fallen the fastest and steepest even before the strait has reopened," said Sarah Marlow, head of fertiliser pricing at Argus.

On the demand side, lower purchasing during periods of high prices could affect output and yield. Máximo Torero, chief economist at the Food and Agriculture Organization (FAO), warned that reduced demand is "not good news" and that it could translate into lower yields.

Farmers have already responded by curbing application rates or adjusting planting decisions in reaction to the elevated costs. "One of our working theories is that global farmers finally pushed back and said ‘the price is too high: I am going to cut back on my nitrous application’," said Josh Linville, vice‑president of fertilisers at broker StoneX. He added that the large volume of tonnage cut globally helped rebalance supply and demand.

Alzbeta Klein, head of the International Fertiliser Association, cautioned that production decisions taken during the price spike will still affect harvest outcomes. "People made decisions to plant certain things as opposed to other things, so the impact on yield will be visible in three to four months," she said.

Some analysts argue that the timing of the disruption limited demand destruction effects, as much of the northern hemisphere had already secured supplies before trade flows were interrupted. Willis Thomas, head of fertilisers at CRU, noted that most of the northern hemisphere had in‑warehouse fertiliser and the southern hemisphere had not yet begun to buy for their seasons.

Traders also pointed to improving expectations for supply as China signalled a return of exports from 1 June, easing concerns over global availability. "The market saw that and they knew that was coming, and they started to say, ‘OK, the worst part of this is over’," Linville said.

Despite the price correction, physical markets remain tight, with significant volumes still delayed in transit. "It will take time for producers to rebuild stocks and return to prewar operating rates," said Marlow. CRU estimates nearly 900,000 tonnes of urea remain in floating storage in the Gulf, much of it already sold but not yet delivered.

"As prices fall, buyers will wait for the bottom to be reached before returning to the market," Marlow added.

While urea has retreated, phosphate fertiliser markets remain constrained by a separate supply shock linked to sulphur availability. "It is sulphur that remains critical in terms of both availability and price," said Marlow. Argus data show sulphur prices have more than doubled since the start of the conflict, rising 110 % in China and 133 % in Mediterranean markets.

The broader context of the Middle East conflict has amplified supply‑chain pressures. The Strait of Hormuz, which carries about 30 % of global urea shipments, was closed for several weeks in early 2026, prompting rerouting and logistical bottlenecks. The U.S.–Iran peace deal, announced in late May, has lifted some uncertainty, but physical delivery delays and inventory rebuilds will take time.

In summary, urea prices have returned to pre‑war levels, but the market remains constrained by delayed shipments, inventory rebuild needs, and ongoing sulphur price pressures. Buyers are waiting for a sustained price decline before re‑entering the market, while producers work to restore stocks. Phosphate markets continue to feel the impact of high sulphur costs.