India’s Urea Production Plummets as Iran Conflict Disrupts LNG Supply to Key Plants

Major Indian urea producers, including Rashtriya Chemicals & Fertilizers Ltd. and National Fertilizers Ltd., have suspended operations at four of their eight plants since early March 2026, citing acute shortages of liquefied natural gas (LNG). The shortfall follows a sharp reduction in Iranian LNG shipments to India, attributed to regional instability and logistical challenges in the Strait of Hormuz. The closure of these facilities—responsible for approximately 30% of India’s annual urea output—has led to a national shortfall of 1.8 million tons of nitrogen-based fertilizer by mid-April. With India consuming over 18 million tons of urea annually, this disruption threatens the upcoming Kharif crop cycle, particularly for rice and cotton farmers across Maharashtra, Andhra Pradesh, and Punjab. Commodity markets reacted swiftly: U.S. natural gas futures (NG=F) rose 8.3% over two weeks, while crude oil (CL=F) gained 4.1% amid fears of broader energy supply volatility. The VIX index spiked to 22.6, reflecting heightened investor anxiety over geopolitical risks. Global urea prices surged to $485 per ton, a 22% increase from January 2026 levels, according to trade reports. The ripple effects extend beyond agriculture. Indian fertilizer import bills may rise by $1.2 billion in the second quarter, pressuring the country’s trade deficit. Energy firms reliant on LNG contracts with Iran face renegotiations, while global fertilizer exporters such as Russia and Morocco are poised to fill the gap, though at higher freight and logistics costs.