Beyond Oil: Helium and Fertiliser Supply Chains Threatened by Hormuz Standoff
Since the Middle Eastern conflict erupted nearly a month ago, analysts have been closely monitoring energy market data. On 2 March, Iran declared the Strait of Hormuz "closed," a critical waterway responsible for shipping approximately one-fifth of the world's oil and gas. This declaration sent oil prices spiraling out of control, surging to over $110 (£82.14) per barrel. In response, the United States launched a military operation to reopen the strait, deploying jets and helicopters to the region.
While the market focuses on oil prices and potential fuel shortages, other essential commodities are also trapped in the Gulf, poised to deliver significant repercussions across multiple industries.
Helium: A Critical Gas Beyond Balloons
Contrary to popular belief, helium's applications extend far beyond birthday balloons. This gas is a vital input in chip manufacturing, medical imaging, and space technology. Qatar, which supplies one-third of the world's helium, has been forced to halt production due to the conflict. The nation's state-owned gas company warns that strikes on energy infrastructure could further cripple exports.
Transporting helium presents unique challenges. It is stored in insulated containers as a liquid for 35 to 48 days. Beyond this timeframe, molecules warm up and escape, reverting to gas and losing value. This degradation threatens the supply chain for semiconductors, including chips used in artificial intelligence models. A shrinking helium supply could negatively impact leading technology stocks, already grappling with fears of a potential AI bubble.
In the medical technology sector, helium is essential for cooling magnets in MRI machines. The space industry relies on it to purge rocket fuel tanks. Demand from private space companies like Elon Musk's SpaceX and Jeff Bezos' Blue Origin is expected to grow as they plan more frequent launches.
Thomas Abraham-James, founder and CEO of Pulsar Helium, commented: "This crisis presents two problems for helium markets. Even with intact infrastructure, the Strait's closure prevents product from reaching market until hostilities cease. Qatar's helium, used in semiconductor fabrication, MRI machines, fibre optics, and space launch vehicles, faces both structural plant damage and an export blockade. Limited volumes may resume within weeks if tensions de-escalate, but meaningful supply normalisation could take months, with full restoration of damaged capacity requiring years."
Fertiliser: A Threat to Global Food Security
The Strait of Hormuz also transports fertiliser components that support around half of the world's food supply. Gulf states account for 49 per cent of globally traded urea, a nitrogen-rich fertiliser used for crops like wheat. Since the war's outbreak, urea prices have skyrocketed by over 40 per cent, coinciding with the spring planting season in the Northern Hemisphere. This price spike is likely to trickle down to consumers.
Beyond rising costs, fertiliser delays threaten overall food production. The inability to purchase this commodity could lead to reduced crop yields, exacerbating global food insecurity.
Kelly Xu, commodity and energy strategist at Alpine Macro, noted: "The Iran conflict is increasingly affecting global fertiliser markets. Key product prices have risen sharply—urea and ammonia are up roughly 50 per cent and 20 per cent, respectively. Sustained disruption risks amplifying pressure on agricultural markets. Northern Hemisphere farmers face elevated input costs and uncertainty during spring planting, potentially leading to lower application rates, weaker yields, and higher food inflation."
The Gulf also contributes about 30 per cent of the world's ammonia, another crucial fertiliser component. Several suppliers, including Qatar, have shut down production due to strikes and the strait closure.
