How a War with Iran Could Impact U.S. Agriculture: Economic Fallout, Supply Shocks, and Farmgate Realities

As geopolitical tensions escalate between the United States and Iran, the agricultural community must prepare for the financial, logistical, and systemic risks that an armed conflict could unleash. A war with Iran would not remain confined to foreign soil—it would ripple through oil markets, global trade flows, and input supply chains, all of which are foundational to U.S. agricultural viability.

1. Fuel Prices: Volatility Hits the Farm First

Iran sits near the Strait of Hormuz, a chokepoint through which roughly 20% of the world’s oil supply passes. A disruption would spike global crude oil prices. U.S. farmers and ranchers—heavily dependent on diesel for planting, harvesting, irrigation, and transport—would face immediate cost increases.

Example: A 20% rise in diesel prices could increase per-acre corn production costs by $20–$40, depending on tillage intensity and irrigation reliance. For large-scale operations, this can push operating costs hundreds of thousands higher overnight.

2. Fertilizer and Chemical Supply Chains Under Threat

The Middle East and Russia are both key global suppliers of urea, phosphate, and potash. A war could destabilize or reorient trade flows. Sanctions or shipping disruptions may cause input prices to skyrocket again—as they did during the Russia-Ukraine war.

Already in 2025, fertilizer prices are volatile. The March USDA Prices Paid Index indicates a 0.3% monthly rise in input costs, with potash and phosphate among the key contributors. A war could push that trend into double digits.

3. Export Markets: Grain, Cotton, and Meat May Get Hit

If the conflict triggers broader instability in the Middle East or Asia, it could choke off export demand from key agricultural customers such as Turkey, Egypt, and South Korea. Additionally, retaliatory trade restrictions or sanctions could affect markets for U.S. wheat, corn, soybeans, and beef.

In 2024, U.S. ag exports to the Middle East exceeded $6 billion. Any decline of 20–30% could lead to oversupply domestically, depressing commodity prices.

4. Insurance and Credit: Higher Risk Premiums for Farmers

Lenders may tighten underwriting standards on operating loans, especially for producers with exposure to fuel-intensive operations. At the same time, crop insurance premiums may rise due to higher risk factors factored into USDA actuarial models.

Programs like EQIP (Environmental Quality Incentives Program) may face reallocation if federal budget priorities shift toward defense. Delays in FSA loan processing or reductions in targeted funding cannot be ruled out.

5. Consumer Demand: Food Inflation Could Reignite

While farmgate prices for grains may fall, input-driven cost surges and transportation disruptions will likely lead to higher retail food prices. Protein products such as beef and dairy, already under pressure from declining herd sizes and rising feed costs, may see margins collapse if retail demand softens amid economic uncertainty.

USDA data shows beef cattle prices were already $202/cwt in March 2025—up $17 from 2024. A decline in demand amid economic contraction would compress already tight profit margins.

Conclusion: Prepare for Shock, Not Stability

A war with Iran wouldn’t just affect fuel prices—it would cascade through every layer of agricultural economics. From financing to fertilizer, exports to equity, this conflict could create the most significant ag-sector disruption since the 1970s oil crisis.

Farmers, lenders, and policy planners need to scenario-test budgets, hedge inputs, and prioritize resilience strategies now. In an era of war-driven market chaos, preparation isn’t pessimism—it’s survival.