EuroOilWatch Analysis — the fertiliser shock hiding inside the energy crisis, and how it reaches European food prices.
The next major consequence of the Middle East conflict may not appear first in the oil price.
It may appear in the food aisle.
Sulphur prices have reached extraordinary levels. Phosphate-fertiliser production is being curtailed. China has restricted fertiliser exports. Russian refinery damage has triggered a diesel export ban. And Europe is entering this squeeze from a position of unusual weakness in exactly the two inputs under threat — fertiliser and diesel — while its own maize crop is failing in the heat.
These are not separate stories.
They form a single compound cascade connecting the Strait of Hormuz, Russian refineries, Chinese export controls, Brazilian fertiliser plants, farms from Mexico to France, and supermarkets on both sides of the Atlantic.
The emerging threat is no longer simply expensive energy. It is the possibility that energy disruption begins removing the industrial inputs required to produce food — and Europe is more exposed than its distance from the Gulf suggests.
Europe imports much of its fresh produce and a large share of its fertiliser, having lost a great deal of its own ammonia and nitrogen-fertiliser capacity to high gas prices since 2022. It relies on Russian, Gulf and North African supply for the very inputs now being disrupted. With energy, fuel and now food-input costs rising together, inflation risk is climbing back up the European Central Bank's agenda.
Market snapshot
Sulphur. Sulphur reached record highs on 28 May — about $815–820 per tonne FOB Middle East and $1,200 per tonne CFR Brazil (S&P Global). Those figures marked the spike that helped trigger the phosphate curtailments now unfolding; subsequent prices have varied by region, but availability remains severely constrained.
Phosphate production. Mosaic has extended and deepened phosphate-production curtailments it began in Brazil in April — citing declining sulphur inventories, higher input costs and Hormuz shipping constraints — with operations at Candeias and Catalão temporarily suspended and a gradual mothballing of its 1mn t/yr Uberaba plant planned from September.
Russian diesel. Russian diesel and gasoil exports collapsed to roughly 234,000 barrels per day over 1–10 July, against a 2025 average near 817,000 barrels per day (Kpler). Russia imposed a full diesel export ban on 8 July, running to 31 July, after Ukrainian strikes worsened domestic shortages and refinery disruption.
European diesel margin. The ban pushed benchmark European diesel refining margins — the low-sulphur gasoil–Brent crack — above $60 per barrel (Reuters reported a record $60.17, then $60.77 in a later account), while US diesel futures jumped about 11% in a single session. Diesel is where the squeeze reaches European industry, farming and freight first.
China. China restricted exports of certain phosphate fertilisers and nitrogen-potassium blends in March, then tightened customs inspections in April — protecting Chinese farmers and domestic availability while reducing supply for everyone else, Europe included.
Europe's own crop. France's maize crop has been hit by heat and drought, with good-to-excellent ratings at their lowest in at least 15 years; Coceral has cut its EU maize forecast about 8% to 52.7 million tonnes, the lowest since 2007.
Global grain buffer. USDA projects both wheat and corn production below consumption in 2026/27, with global corn ending stocks at 275.3 million tonnes — the lowest since 2013/14. Not catastrophic, but it leaves less room to absorb another regional crop failure.
The signal the market is missing
Sulphur is generally treated as a secondary industrial commodity. That is a mistake.
Sulphur is converted into sulphuric acid, which is required to process phosphate rock into phosphoric acid. Phosphoric acid is then used to manufacture phosphate fertilisers such as DAP and MAP. Without sulphur, much of the modern phosphate-fertiliser industry cannot operate.
Most sulphur is not produced independently. It is recovered as a by-product of oil refining and natural-gas processing. The fertiliser system is therefore physically connected to the energy system. When refineries and gas-processing plants slow down, are damaged or lose access to export markets, sulphur production can fall with them. When Hormuz shipping becomes dangerous, sulphur cargoes face the same freight, insurance and transit problems as oil, LNG and refined fuels.
The important development is not simply that sulphur has become expensive. It is that phosphate producers are beginning to reduce production because the input is too costly or too difficult to secure.
That marks a transition from a price crisis to a possible volume crisis.
A high price can suppress demand or attract replacement supply. A plant curtailment removes physical fertiliser from the market.
The cascade
MIDDLE EAST CONFLICT
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Oil, gas, sulphur, ammonia and fertiliser shipments disrupted
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Sulphur and sulphuric-acid prices rise
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Phosphate-fertiliser plants reduce production
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China restricts fertiliser and chemical exports
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Europe, Mexico and Brazil compete for fewer replacement cargoes
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Fertiliser, diesel, freight and pesticide costs rise together
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Farmers reduce applications, acreage or crop investment
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Crop output weakens — in Mexico, Brazil and a heat-hit Europe
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Less produce and grain reaches the market, at higher cost
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Food, feed, meat, dairy and freight prices rise
No single arrow guarantees the next. The risk comes from several arrows activating at the same time.
Russia tightens the market from two directions
Russia matters both as a major fertiliser producer and as a major fuel exporter — and Europe buys both.
Russian fertilisers have generally been spared direct Western sanctions because of the danger to global food security. But producers continue to face payment, insurance and logistical difficulties tied to the wider sanctions regime — and a cargo does not need to be formally prohibited to become difficult to move. A buyer still needs a bank willing to process payment, an insurer willing to cover the vessel, a shipowner willing to enter the port, and intermediaries confident the transaction will not later expose them to penalties. Tighter sanctions on Russian banks, shipping or insurance could therefore disrupt fertiliser flows even where fertiliser itself remains exempt — a direct risk for European importers that still lean on Russian nitrogen.
The second mechanism is diesel. Ukraine's attacks on Russian refineries have cut product output and deepened domestic shortages, and Russia has restricted exports to protect its own market. That does not merely affect motorists. Diesel powers tractors, harvesters, mining equipment, irrigation pumps, refrigerated trucks, cargo ships and backup electricity. It is used to mine phosphate, transport sulphur, distribute fertiliser, harvest crops and deliver food. A diesel shortage therefore multiplies every other agricultural cost — and even if crude prices fall, food inflation can continue if refineries cannot produce enough diesel. For Europe, where the diesel refining margin has just hit a record, that channel is already live.
China is protecting its own food system
China's fertiliser restrictions should not be treated as a temporary customs inconvenience. They are a food-security policy.
When international prices rise far above domestic prices, Chinese producers have an incentive to export. Beijing has the opposite incentive: to keep fertiliser inside China and prevent global shortages from raising Chinese food prices. Export bans, quotas, licensing and enhanced customs inspections all achieve this without a dramatic announcement. The consequence is straightforward — material that would normally reach India, Southeast Asia, Brazil, Mexico or Europe stays inside China. The policy is rational from Beijing's perspective, but it transfers the shortage elsewhere.
China also sits at the centre of pesticide, herbicide, fungicide and chemical-intermediate production. A broader trade confrontation could therefore strike agriculture through two systems at once — fertiliser and crop chemistry. A farmer who secures fertiliser but cannot obtain an affordable fungicide has not solved the production problem. Modern agriculture depends on several interlocking chemical systems; failure in one can undermine spending on all the others.
Mexico is the clearest transmission example
The mechanism is easiest to see in Mexico — where a global input crisis is already turning into a national food-production problem, and, through trade, an American one.
Mexico imported approximately 3.8 million tonnes of fertiliser in 2025, with imports from China up 124% (from about 439,000 to 982,000 tonnes). UN Comtrade data compiled by Trading Economics value its Russian fertiliser imports at about US$550 million that year — even as Russian volumes fell 16% to 1.179 million tonnes — Russia having been its largest foreign supplier in 2024. That leaves a concentrated exposure: from Russia, the risk of sanctions, payments and export limits; from China, the risk of quotas and deliberate domestic prioritisation; from the Gulf, the risk of disrupted sulphur, ammonia, urea and maritime supply. Mexico's corn production is forecast to fall about 2% to 24.3 million tonnes in 2026/27 (USDA), while corn imports have climbed to a record 26.5 million tonnes in 2025/26 and are forecast near 27 million tonnes in 2026/27.
Because Mexico supplies roughly 51% of US fresh-fruit imports and 69% of fresh-vegetable imports by value (USDA, 2023), higher Mexican input costs feed quickly into American shelves — smaller planted areas, lower yields, higher farm-gate and refrigeration costs on tomatoes, peppers, berries and avocados. And as Mexican corn output falls, Mexico buys more US grain, firming American feed prices for poultry, cattle and hogs. The United States could face less affordable produce arriving from Mexico while more of its feed grain leaves for Mexico — a two-sided squeeze. Europe is not on that particular corridor, but it competes for the very same replacement fertiliser tonnes, and its own crop is failing at the same time.
Brazil is the force multiplier
Brazil makes this problem global. Its agriculture is heavily dependent on imported fertiliser, and its soils often require substantial nutrient application to sustain high yields — farmers cannot simply stop applying without risking a significant loss of productivity. It is also a major exporter of soybeans, corn, sugar, coffee, orange products, poultry and beef.
Sulphur shortages are already hitting Brazilian phosphate production; Mosaic's curtailment confirms the pressure has reached the factory floor. At the same time, imported-fertiliser costs are squeezing Brazilian farm margins. Brazil could therefore become both a larger buyer of internationally traded fertiliser and a less reliable source of production growth — intensifying competition for the fertiliser Europe also needs, while reducing the output that normally absorbs crop problems elsewhere. A Gulf sulphur shortage could reach the European consumer through Brazilian coffee, orange juice, sugar or beef, quite apart from Europe's own harvest.
A second Russian shock is forming in the Black Sea
Russia's knock-on effects are not confined to fertiliser and diesel. The Black Sea and Sea of Azov remain central to Russian and Ukrainian grain exports — much of it bound for or competing with European supply — and the latest escalation has brought attacks on vessels, port infrastructure and maritime routes. Wheat prices have moved sharply higher after the latest strikes, and restrictions in the Sea of Azov matter because the route handles a meaningful share of Russian grain exports.
Russian refinery disruption
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Lower diesel exports and higher agricultural costs
Black Sea disruption
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Higher grain freight, insurance and wheat prices
Together
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The food system is hit at both the input and output stages
The system is not merely losing cheap fertiliser. It is becoming more expensive to grow, process, insure and transport the grain that fertiliser produces — and Europe, on the Black Sea's doorstep and short of its own maize, sits close to both ends of that squeeze.
What this means for Europe
Europe's immediate danger is principally price and inflation, rather than oil or food physically disappearing tomorrow.
Three things make the continent more exposed than its distance from the Gulf implies. First, Europe has lost a large share of its own ammonia and nitrogen-fertiliser capacity to high gas prices since 2022, leaving it dependent on imports — including Russian, Gulf and North African supply — for the very inputs now being disrupted. Second, its diesel balance is already the tightest in the system, with the refining margin at a record just as farming, freight and construction need it most. Third, its own harvest is weakening: France's maize is heat-damaged and EU maize forecasts have been cut to their lowest since 2007, so there is less domestic cushion to compensate for imported inflation.
Europe can source fertiliser, diesel and grain from elsewhere — but so can everyone else. In a market where China is withholding, Russia is constrained and the Gulf is disrupted, Europe competes for a shrinking pool of replacement cargoes at the same moment its fields underperform. The result is unlikely to be empty shelves. It is more likely to be persistently higher food and fuel costs — the kind of renewed, energy-led inflation impulse that keeps a central bank cautious.
The grain buffer is narrowing
The present global grain position is not yet a food crisis. But the margin for absorbing the next shock has deteriorated. USDA projects both wheat and corn below consumption for 2026/27, with global corn ending stocks the lowest since 2013/14, while Europe's own maize is being cut back by heat and drought.
A single poor harvest can usually be managed. A poor harvest combined with expensive fertiliser, expensive diesel, export restrictions and disrupted shipping is different. The danger is not that the world suddenly runs out of food. It is that the ability to compensate for regional failures begins to disappear.
What happens next
Stage one — the industrial squeeze (now through the next several months). The first effects stay upstream: sulphur elevated, phosphate makers cutting operating rates, traders prioritising larger buyers, freight and insurance costly around conflict zones. Supermarket prices may barely move, because farmers are still using fertiliser bought earlier and crops already in the ground. That delay can create false reassurance — the absence of immediate food inflation does not mean the cascade has stopped; it means the shock has not yet reached harvest.
Stage two — the farmer response (the next purchasing and planting cycle). Farmers respond to higher costs by cutting phosphate applications, switching to less fertiliser-intensive crops, trimming marginal acreage or delaying spending. Larger commercial growers may absorb the cost; smaller and indebted farmers — in Europe as much as in Mexico or Brazil — may not. The first clear signs would be lower fertiliser purchases, weaker planting intentions, more demand for subsidies and reduced yield expectations.
Stage three — the trade reallocation (late 2026 into 2027). Countries compete harder for available supply. China keeps prioritising its own farmers; Russia directs material to favoured markets; Europe, India, Brazil and Mexico chase alternative cargoes. The largest and best-financed buyers secure supply, but at higher prices. The crisis becomes less about total production and more about tradeable availability — there may be enough fertiliser somewhere, but not necessarily where and when a given farmer needs it.
Stage four — the consumer effect (principally 2027, though fresh-produce and diesel effects can arrive sooner). Lower yields and higher logistics costs reach processors and retailers. For Europe, the pressure points are fresh produce, diesel-intensive and refrigerated foods, animal feed and the meat, dairy and egg prices that follow feed costs — plus imported coffee, sugar and orange products. Food inflation would not move evenly — contracts, inventories and retailer margins can hide or delay it — but the cost does not disappear. It is transferred along the chain until it can no longer be absorbed.
What would break the cascade
The outlook would improve materially if several conditions eased together: Hormuz shipping normalised and stayed secure; Gulf sulphur and fertiliser exports recovered; sulphur fell enough for curtailed phosphate plants to restart; Russia restored refinery operations and diesel exports; China relaxed fertiliser controls; European, Mexican and Brazilian farmers secured adequate inputs before planting; and global harvests — including Europe's — beat current forecasts.
One positive development alone may not be enough. A Hormuz reopening would ease sulphur and energy pressure, but Russian diesel restrictions could persist. A relaxation of Chinese controls would help availability, but Brazilian producers might still face unsustainable sulphur costs, and France's maize would still be in the ground. The system needs several bottlenecks to ease at once.
The indicators we are watching
The most important signals are no longer limited to Brent and WTI.
- Sulphur & phosphate — Middle East FOB and Brazil CFR sulphur; sulphuric-acid prices; Mosaic/OCP operating rates; DAP and MAP availability, not just price.
- Russia — refinery outages; diesel/gasoil export volumes; the scope and duration of export bans; attacks on ports, pipelines, storage and Black Sea shipping; sanctions on banks, insurers and vessels.
- China — urea and phosphate export quotas; customs inspections; pesticide and chemical-intermediate controls; the domestic-to-export price gap.
- Europe — fertiliser and ammonia import volumes and prices; diesel cracks and cargo premiums; French and EU maize/wheat condition and harvest forecasts; farm-input cost indices; food-price inflation prints.
- Mexico & Brazil — fertiliser imports by origin; domestic urea and DAP prices; corn and soybean planting and yield forecasts; farm-credit stress; fertiliser-to-crop price ratios.
- Food-market confirmation — wholesale produce prices; corn and soybean-meal prices; poultry and livestock feed costs; global wheat freight and insurance; food-export restrictions by major producers.
Assessment
The sulphur shock is the clearest sign that the Middle East energy crisis is migrating into the food system. It is not acting alone: Russian refinery damage is tightening diesel; wider sanctions could complicate fertiliser payments and shipping; China is protecting its domestic market; Brazilian phosphate output is being curtailed; Mexican corn production is weakening; France's maize is failing in the heat; and the global grain balance is losing its margin for error.
The crucial change is that the crisis is moving upstream, into the inputs required for production. Oil shortages can be partly buffered by inventories. A missed fertiliser application cannot be corrected after the crop has passed the relevant growth stage. A farmer who plants less cannot add the missing acreage at harvest. A phosphate plant that cuts production removes tonnes that financial markets cannot recreate. That is why the final food-price effect may arrive months after the energy headlines appear to have stabilised.
The full cascade is not yet inevitable. But its upstream stages are already visible: record sulphur prices; fertiliser-production cuts; Chinese export restrictions; Russian diesel losses; a heat-hit European maize crop; and tightening global grain balances.
Europe's next food-price shock may not begin in a European field. It may begin with sulphur trapped behind Hormuz, diesel missing from a Russian refinery, and a fertiliser cargo that never reaches the farmer who needed it — Mexican, Brazilian or French alike.
This is part of EuroOilWatch's live coverage of the 2026 energy shock. For the chokepoint and diesel mechanics beneath it, see Hormuz Is Not Reopened and The Second Shock Is Not the First; for the economics of why concentrated, "efficient" supply chains break this way, see Why Cheap Energy Isn't Always Cheap.