What's the Connection Between the US War on Iran, Fuel, Fertilizer, and Food Prices? (Part 1)

• The US War on Iran looks to be changing the dynamics of the commodity complex as a whole. 

• Fear Of Inflation Long-term (F.O.I.L.) has sparked a rally in both commodities and the US dollar while US stock indexes and Fed fund futures fall. 

• Higher input costs - predominantly fuel and fertilizer - could lead to a larger than expected switch in US planted acres away from corn. 

Last week, I had the opportunity to work with my long-time friend Myra Saefong of MarkeWatch again. We had a lengthy conversation via email spanning many days, as each sunrise brought something new to the commodity complex. The heart of Myra’s questions was consistent, though: “Can you (me) connect the dots between Iran closing the Strait of Hormuz, higher fertilizer prices, and global food security?” Sure. That seemed simple enough. However, as it turned out, the more dots I connected, the more dots were added to the puzzle. As we prepare to set sail into the great unknown of another week’s worth of trade Sunday, let’s look at how some of these dots fit together.

The US War on Iran: Like every other war the US has started in the Middle East, it was led into this one without understanding the enemy. Once the bombings and missiles began flying from Israel, the powers that be should’ve known, had to have known, Iran would shut down the Strait of Hormuz. Reportedly, the Strait handles approximately 20% of global oil consumption and roughly 33% of the “world’s traded seaborne fertilizer”. As a result of the US military action, and Iran’s reaction, the spot-month global Brent crude oil contract (QAK26) has gained nearly 64% this month, the spot-month US WTI market (CLK26) has added as much as 78% during March, distillates (diesel fuel, jet fuel, etc.) (HOJ26) has jumped 81%, and the spot-month US Gulf urea (nitrogen fertilizer price) (JCJ26) is up 32.5% for the month and 76% from its early December 2025 low. 

Inflation: For those of us who aren’t economists and therefore are not addicted to the variety of government statistics on inflation, a quick search told me the measure of prices that includes food and fuel is the Consumer Price Index for All Urban Consumers (CPI-U). The February 2026 number was released on March 11 and showed a 0.3% increase “on a seasonally adjusted basis” and a 2.4% increase over the last 12 months “before seasonal adjustment”. What does all that mean? I have no idea, except prices for everything continue to go up. Now, given what we’ve seen on the fuel side, think about what the March number should show when it is released on April 10. Those of us following along with the markets can already see there is real inflation given the US dollar index ($DXY) is firming along with the commodity complex as a whole (setting gold and silver aside for the time being) while US stock indexes ($INX) ($DOWI) ($NASX) fall. Even more telling is last week’s dramatic shift in the Fed fund futures forward curve indicating there will not be another rate cut during 2026, with the November futures contract (ZQX26) teasing a possible rate HIKE. Think about that for a moment. 

US Spring Planting Season: As you know, I spend the fall and winter quarters each year tracking the November soybean/December corn futures spread for an indication of how US planting decisions might go the following spring. This year it was an utter waste of time. The fact the spread stayed below its 10-year average weekly closes for much of the 6-month tracking period, favoring more US corn acres, means nothing. The bottom line is input costs started to climb during the winter season as the US first bombed Venezuela, then started rattling its sword toward Iran. I heard from many of you that regardless of what the spread was showing, corn planted area was going to lose ground to soybean planted area. I’ll give USDA credit, as the agency seemed to have an idea the input cost situation was going to get worse over time. In its Baseline numbers released in early February the agency’s accountants penciled US corn acres in at 95.0 million, down 3.8 million acres (ma) from 2025’s “final” figure of 98.8 ma. On the other hand, US soybean area was written in at 85.0 ma, up 3.8 ma from last year. Within the next 10 days, at USDA’s 2026 Annual Ag Forum, the numbers were adjusted to 94.0 ma of corn with soybeans left unchanged at 85.0 ma. (For the record, all wheat picked up the other 1.0 ma.) This puts a brighter spotlight on the next round of guesses in the March 31 Prospective Plantings report. If all that has happened so far in March is accounted for, these numbers could change dramatically. If not, it might be pushed back to the June 30 Acreage update. 

Less Corn: Regardless of what USDA comes up with for acreage numbers, the reality is the US will grow less corn in 2026 than it did in 2025 (whatever that number actually was). Does this mean the new-crop corn market will skyrocket? Probably not, but it is a possibility. Those of you following along with the long-term investment theoretical positions in Monthly Analysis will recall the December corn-only continuous monthly chart showed buying opportunities at the end of August 2024 and August 2025, creating a long Dec26 position of roughly $4.62. March 2026 has seen Dec26 (ZCZ26) post a high of $4.9850 while the new-crop Dec26-Jul27 forward curve continues to cover a bullish level of calculated full commercial carry. Meanwhile, Watson has built a sizeable net-long futures position in corn, last reported at 312,340 contracts as of Tuesday, March 17. Eight weeks before funds held a net-short futures position of 51,700 contracts. With buying coming from both commercial and noncommercial interests, the corn market, particularly new-crop, would be considered a Type 9 market (out of 9), the most bullish type. 

To be continued with Part 2 Wednesday.