The US-Israeli war on Iran has created the largest supply disruption in global oil market history, with 15 million barrels of oil and 5 million barrels of refined products passing through the Strait of Hormuz daily before the conflict. According to the International Energy Agency, this represents the largest supply disruption in the history of the global oil market. While some oil exports have been diverted to Saudi Arabia's Red Sea ports, 20 million barrels of productive capacity have been taken offline, with the oil market estimated to have lost about 10 million barrels per day in production. Oil prices have been fluctuating around $100-110 per barrel for the past two months, with some forecasting oil reaching $150 per barrel - a level not seen since 2008. The crisis has been compounded by eight oil refineries being targeted during the conflict, with eight of them fully or partially offline and requiring months to repair after the war ends.
The Iran war has triggered a 50% increase in global fertilizer prices, with the Gulf region producing 30% of globally traded chemical fertilizer according to the International Food Policy Research Institute. Senegalese farmer Abou Sow exemplifies the shift toward organic alternatives, applying six tons of compost annually instead of chemical fertilizers. As Sow explained, "We can't afford to wait for a ceasefire. It's risky to depend on chemical fertilizers." Senegal annually imports 125,000 tons of fertilizer, with the state sourcing enough for the current season but farmers finding it increasingly difficult to access. The government announced it would subsidize and distribute 30,000 tons of organic fertilizer products, though Sow considers this insufficient. In Brazil, the biofertilizer sector grew 15% from 2023 to 2024, with the country importing over 80% of its fertilizer despite being a leading agricultural exporter.
Experts highlight significant environmental advantages of shifting away from chemical fertilizers, as their production and usage create significant greenhouse gas emissions - the main driver of climate change. Natural fertilizers can sequester carbon in the soil and create fewer problems like runoff that pollute waterways. Susan Chomba from the International Panel of Experts on Sourdough Food Systems noted, "It's good for the planet because you're weaning food production off fossil fuels." However, the transition faces challenges in rural areas where sourcing and transporting large quantities of manure remains difficult. Governments worldwide spend $700 billion annually on agricultural subsidies according to the Organization of Economic Co-operation and Development, with a large share spent on providing chemical fertilizer, making alternatives more expensive and less competitive.
Manufacturing capacity has been significantly affected across the pharmaceutical sector, with companies forced to reduce production levels and face severe healthcare consequences. According to DW reports, for tuberculosis, interrupted treatment increases the risk of multi-drug-resistant TB, which is harder and more expensive to treat. For conditions like glaucoma, delays can lead to blindness, highlighting the critical nature of the disruption. Jaimin Vasa from Vasa Pharmachem in Gujarat has a runway of two to three months left and is maintaining production at 70% versus 90-100% before the war. Manish Reenegusia's Om Speciality Chemicals has seen demand plunge by 30-50%, with textile clients threatening to discontinue business and move to local suppliers. The agricultural sector faces particular challenges, with the Gulf supplying 30 percent of the world's raw materials for fertilizers before the closure of the Strait of Hormuz, combined with rising diesel prices creating a devastating impact on farming.
The government has implemented several measures to ease the burden on petrochemical and pharmaceutical companies. As reported by Mint, in April, the government exempted 40 critical petrochemical products from customs duty until June 30 and allowed minimum quantities of propane, butane, propylene, and butenes for critical sectors. This month, the central government approved an emergency credit line guarantee scheme (ECLGS) to support small enterprises, providing additional credit up to 20% of peak working capital utilized during the fourth quarter of the last fiscal year. The government has also approved a ₹37,500 crore scheme for coal gasification to convert domestic coal into synthetic gas, reducing reliance on imported petrochemicals and fertilizers. To counteract the global oil shortage, governments have released about five million barrels per day from their strategic reserves, though some sources will run out by September, forcing prices higher as supplies become harder to come by.
