Dive Brief:

• The latest war between Israel and the militant Palestinian group Hamas is sparking fears of shocks to fertilizer supplies and prices as a major shipping hub near Gaza operates in “emergency mode.”
• While Israel's port of Ashdod, which is a major gateway for potash exports, remains open, ocean carriers are facing restrictions and in some cases implementing "war risk" surcharges on cargo.
• ICL Group, one of the world's largest fertilizer companies, said in an emailed statement that operations "continue to function during this time of emergency." The manufacturer has increasingly relied on Ashdod in recent years, according to a Scotiabank analysis.

Dive Insight:

A deadly escalation of the Israel-Palestine conflict has turned into all-out war, which could bring new risks to global trade depending on the extent of the fighting.

Trade moving in and out of Ashdod, around 30 miles from the Gaza border, is currently "subject to attack by missiles," according to marine liability insurer NorthStandard. Hazardous materials are also subject to strict entry restrictions.

Insurers have imposed additional war risk premiums on ships calling Israeli ports, and the increased costs are beginning to be passed on to exporters. Israel-based ZIM is charging as much as $120 per twenty-foot equivalent unit.

Israel is a major producer of potash, and around 2% to 3% of supply remains at risk due to the ongoing war, analyst Ben Isaacson said in a Scotiabank note. The country is not a major producer of nitrogen or phosphate.

Fertilizer stocks rallied following the Hamas attack on Israel, according to a Morningstar analysis, but it's unlikely to cause a major rise to prices like what occurred at the start of the Russia-Ukraine war in 2022. Lower global demand and increased production from Belarus and Russia will likely keep potash supply balanced.

Markets are closely watching how the war in Israel unfolds. An expansion of the war to include countries such as Iran and Egypt could bring more substantial shipping disruptions — including to the Suez Canal and the Strait of Hormuz.

“In the case of the conflict in Israel, any expansion of the hostilities beyond the country’s borders could introduce risks to two vital shipping choke points," Christian Roeloffs, co-founder and CEO of logistics platform Container xChange, said in a statement. "However, the extent of these effects will largely depend on the conflict’s expansion and duration.”