You’ve almost certainly seen the impact of the Iran War on global energy markets – if not in the financial news, then at your nearest gas station. Brent crude oil futures spiked 60% in March, touching $120 per barrel. That’s the sharpest monthly increase since a 45% jolt during the initial wave of the 1990 Gulf War.

Everyone is acutely aware of the havoc the Straight of Hormuz blockade has stirred up in the oil and gas sphere. But there are more than just petroleum products passing through this vital shipping lane. Few people realize that one-third of the world’s seaborne fertilizer also transits this narrow channel.

Prior to the shutdown, vessels laden with tens of thousands of metric tons of nitrogen-based fertilizer passed through this clogged waterway daily. Those ships haul supplies from Saudi Arabia and other Gulf State producers to key trading partners like Brazil and India. Chief among them: approximately half of the world’s urea, a popular crop nutrient used to boost production of rice, soybeans, lettuce and countless other agricultural products.

To reap 150 bushels of corn per acre, farmers typically must lay down 150 pounds of nitrogen over the same area – maybe more, since it washes away in the rain and must be reapplied.

Given the massive supply disruption, urea fertilizer prices have predictably shot skyward. Certain grades now trade above $700 per ton, a 50% increase from just a few months ago. Not surprisingly, insurance premiums have skyrocketed as well.

It’s not just nitrogen.

Massive stockpiles of phosphates and potash have also been bottlenecked. Or worse, destroyed in missile strikes targeting production and export infrastructure. As any farmer could tell you, phosphate helps stimulate strong root development and promote efficient water use, while potassium-based minerals like potash regulate plant growth.

These macro nutrients are essential to optimal growing conditions. Without crop fertilizers to protect against drought, disease and pestilence, the world’s farms would produce about half of the grains and vegetables they currently yield.

… and the timing couldn’t be much worse. For many growers, this supply shock happened right at the outset of the spring planting season, when heavy applications are needed to ensure bountiful harvests.

Where this war goes from here is anyone’s guess. But even if this fragile ceasefire holds and normal shipping activity resumes, I like the fundamentals here.

To paraphrase comments sent out to my High-Yield Investing readers back in January, you don’t need a Ph.D. in agronomy to understand the big-picture demographic trends. The world’s population is growing by about 70 million people a year — adding the equivalent population of France every 12 months.

That spells steadily rising demand for agricultural staples. To say nothing of biofuels. Or feeding hungry livestock. Meanwhile, arable farmland is constantly shrinking worldwide due to construction, pollution and other factors — so more bushels must be squeezed from each remaining acre.

China holds about 20% of the world’s population but just 7% of its tillable soil – making it the world’s top fertilizer consumer. Indonesia spreads about 6 million tons of the stuff annually. And in Brazil, fertilizer demand is so strong that incoming ships sometimes wait in line over two weeks to offload their cargo.

Following the breadcrumbs
All of this led me to Nutrien (NYSE: NTR), the world’s top fertilizer manufacturer. The company operates dozens of sites that supply 26 million metric tons of annual sales volume.

Most of the profits come from prolific, low-cost potash mines located north of the border in Canada. Nutrien ships approximately 14 million tons annually, accounting for roughly one-fifth of the world’s total supply. Most of that material is sourced from high-grade deposits that are on the lower half of the industry cost curve, allowing wide margins even in weaker price environments.

Nutrien also sells about 10 million tons of nitrogen-based fertilizers such as urea and ammonia annually. Affordable feedstocks have kept production costs low, driving gross profits in the nitrogen unit up 50% last quarter – and that was before the war began.

Aside from wholesale manufacturing operations, the company also owns 1,900 retail superstores from Indiana to Australia that cater directly to farmers. Located mostly in rural towns, these agricultural supply outlets sell seeds, nutrients, herbicides and insecticides and other everyday farming products.

Nutrien has a sizeable annual capital expenditure budget of around $2 billion. These investments are aimed at retail network optimization and new mine expansion projects. But even after this spending, the business still returns heaps of excess cash to shareholders – about $1 billion in dividend distributions per year.

With an enviable collection of world-class, geographically-advantaged assets and complementary downstream/retail operations, Nutrien is built to generate solid free cash flows even in downcycles. But I don’t think that ability will be tested in 2026 – particularly with a $12 billion aid package bolstering farm balance sheets.

Keep in mind, every $25 per ton increase in potash and urea prices adds $280 million and $65 million, respectively, to the yearly bottom line. That helps explain the 20% bounce in NTR shares since my recommendation. But the stock is still trading at just 6 times trailing EBITDA and has room to sprout.

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