WHILE instability in Iran might feel half a world away, a commodity analyst has warned it could have an impact on Australian grain producers ahead of seeding - particularly when it comes to fertiliser prices. 

Widespread protests broke out in Iran at the end of December, reigniting tensions between the nation and the United States. The US threatened a response if the regime started killing its civilians, and global media outlets have since reported thousands of protesters have been killed. The unrest in Iran prompted the US president, Donald Trump, to announce new tariffs, with a 25 per cent rate to be applied to "any country doing business" with Iran "on any and all business" being done with the US. 

With Iran accounting for 10 per cent of global urea export trade, Episode 3 analyst, Andrew Whitelaw, said this week  the escalating unrest could threaten fertiliser supply, lifting the price risk for Australian growers. 

He said geopolitical risk alone can drive higher urea prices through insurance, freight and supply-chain disruptions, even without physical production shutdowns. Adding to this, the US tariffs could force global buyers into alternative supply pools, increasing competition for the same fertiliser sources Australia relies on.

"Rising fertiliser prices at this point in the season may pressure input budgets and influence nitrogen application decisions on farm," Whitelaw said. 

WHAT HISTORY TEACHES US 

As was highlighted after the US bombed Iran in June, fertiliser markets are particularly sensitive to geopolitical shocks, which Whitelaw explained was because supply chains were highly concentrated and production was capital-intensive.

"Urea plants cannot be switched on and off quickly, and any disruption to gas supply, labour availability, or export logistics can have an immediate impact on global availability," he said.

"Australia, as an import-dependent country, means price signals often move well before physical shortages emerge, compressing the decision window for growers and increasing the risk of paying peak prices during critical purchasing periods." 

Given Iran is a significant urea exporter, accounting for around 10 per cent of the global trade, Whitelaw said political instability and riots in Iran could materially affect global urea markets. 

"Escalating unrest raises the risk of plant disruptions, labour shortages, or energy rationing, all of which could curtail output," he said.

"Even without physical shutdowns, heightened geopolitical risk can restrict exports, raise insurance and freight costs, and slow shipping through the region.

"Markets tend to price in these risks quickly, meaning urea prices can rise on uncertainty alone, tightening availability for import-dependent countries."

Whitelaw said Iranian urea largely served price-sensitive importing regions- meaning any disruption forced those buyers into the same alternative supply pools that Australia depends on.

"This creates a cascading effect where relatively small disruptions can trigger price moves as buyers compete for replacement tonnes in a market with limited short-term flexibility," he said.

"The Trump tariffs on countries that continue to engage in trade with Iran could also prompt our competitors, who may buy from Iran, to purchase from alternative sources, from which we also purchase. This tariff could effectively curtail the supply of urea from a nation that accounts for around 10 per cent of global trade.

"The tariff risk also introduces behavioural changes across global trade flows. Even countries not directly targeted may reduce exposure to Iranian supply to avoid secondary sanctions, compliance risks, or reputational concerns. This can further reduce effective supply, even if the Iranian product remains technically available." 

THE IMPACT OF UNCERTAINTY 

In markets, Whitelaw said perception often matters as much as reality, and risk-averse buyers could accelerate tightening conditions simply by stepping back from contested origins.

"We don't have to look far back in history to see the impact of uncertainty in Iran. Last June, there was military action between Israel and Iran, and bombing runs by US forces on Iran," Whitelaw said. He added urea prices have risen in recent weeks due to increased demand from India, and if instability in Iran escalates, urea prices could rise dramatically.

"For Australian growers, the timing of these price movements is particularly challenging," Whitelaw said.

Fertiliser purchasing decisions are being made as geopolitical risk rises, limiting the ability to wait for clarity. Higher prices at this stage of the season can materially affect input budgets, gross margins, and nitrogen application strategies, prompting some producers to reassess rates or timing to manage risk.

"The big question will be what happens in Iran. If the government collapses, will the recovery be quick or slow? The longer the recovery, the more the pain." 

THE SILVING LINING 

As was highlighted during the conflicts in June last year, Whitelaw said the conflict in Iran could be positive for grain prices.

"Iran controls the Strait of Hormuz, a shipping lane responsible for nearly 20 per cent of global oil trade. The market is already reacting, with oil prices hitting seven-week highs due to fears of supply chain risks," he siad. 

"Our wheat pricing tends to be strongly linked to energy markets, so a rise in crude oil prices could positively impact wheat pricing in Australia.

"The situation in Iran is evolving, and we need to monitor developments."