Iran reopens southern ports as Strait of Hormuz deal signals 60% export recovery

Iran restored normal shipping traffic at its southern ports after the US-Iran peace deal reopened the Strait of Hormuz, a waterway that handles about a fifth of the world's seaborne oil and LNG and a third of its fertilizer.

"The reopening of the Strait is unlikely to result in an immediate return to normal operations, given the reported need for minesweeping and the clearance of the backlog of vessels accumulated in the Persian Gulf during the disruption," said Alexander Karavaytsev, senior economist at the International Grains Council.

More than 500 ships remain stranded in the strait, according to ship-tracking firm Kpler, with traffic currently running at less than 10 percent of normal levels. The Gulf region accounts for 60 to 70 percent of India's $6 billion annual basmati rice export market, which had nearly ground to a halt due to conflict-related shipping bottlenecks and surging freight costs. "Greater stability in the region is expected to improve trade flows and revive demand from key Gulf markets, providing a much-needed boost to India's basmati exports in the months ahead," said Satish Goel, president of the All-India Rice Exporters' Association.

The tentative deal, expected to be formally signed June 19, could ease supply disruptions that pushed up fertilizer prices and raised marine fuel costs globally. But the IGC warned that shipping patterns may remain below historical norms for an extended period, similar to the Red Sea and Suez Canal disruptions that have persisted for years. "The experience of the Red Sea and Suez Canal disruptions shows that shipping patterns can remain below historical norms for years," Karavaytsev said.

Strait Reopening Faces Logistical Hurdles

Within days of the strait reopening, a limited pickup in traffic should be expected, but complete normalization hinges on restoring shippers' confidence, Karavaytsev said. Energy cargoes will likely receive priority, followed by dry bulk and container trades including grain and oilseeds imports. Elevated risk insurance premiums are also likely to persist, potentially delaying a full return to pre-crisis cargo flows.

The Gulf region entered the crisis with relatively comfortable grain and oilseed supplies after strong import programs earlier this year, the IGC noted. Saudi Arabia purchased nearly 1 million tonnes of wheat for delivery to Red Sea ports during June through August, while domestic wheat harvests in Iran and Iraq are set to limit nearby import requirements.

Fertilizer and Fuel Costs Ripple Through Agriculture

The main impact from the strait restrictions fell on input markets. Fertilizer prices increased, potentially encouraging some growers to reduce application rates. Higher crude oil prices also raised marine fuel costs, freight rates and agricultural operating expenses, Karavaytsev said.

For much of the Northern Hemisphere, fertilizer applications for the 2026-27 crop have already been completed and input costs are largely locked in. Improved availability and lower prices would be more relevant for Southern Hemisphere crops, including late top-dress applications for wheat and South American maize and soybean crops planted from September. Still, Karavaytsev said weather developments are expected to have a greater influence on global grain and oilseed production in the season ahead than fertilizer-related factors.

The last time a major chokepoint closure disrupted global commodity flows — the 2023-24 Red Sea crisis — shipping costs surged more than 200 percent before stabilizing, and traffic through the Suez Canal remains below pre-crisis levels. A similar trajectory for the Strait of Hormuz would mean elevated costs for energy and agricultural markets well into 2027, even as Iran's port operations return to normal.

This article is for informational purposes only and does not constitute investment advice.