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Strait of Hormuz closure continues to drive energy markets.
Crude oil prices increased to $109 / barrel by mid-May, but then gradually fell and ended the month at about $92 / barrel. The continued closure of the Strait of Hormuz along with developments in negotiations between the U.S. and Iran are driving price volatility (see Spotlight for more information). Gasoline and diesel prices held relatively steady throughout most of the month, then softened toward the end due to falling crude oil prices.
Fertilizer prices stay elevated, prompting government intervention.
Fertilizer costs remain elevated heading into June, following sharp increases earlier this spring. Nitrogen prices have led the increase, with urea up 27% year over year and anhydrous ammonia up 44%, driven largely by tightening global supply. Geopolitical tensions in the Middle East have disrupted production and key shipping routes. Phosphate markets have also remained firm amid ongoing export restrictions and broader supply constraints. As a result, affordability remains a key concern for producers. The U.S. Federal Trade Commission launched an official investigation into the fertilizer industry in late May. While increased scrutiny may improve price transparency and competition over time, it is unlikely to provide near-term price relief. Additionally, the U.S. Department of Transportation’s Federal Motor Carrier Safety Administration issued a waiver reducing restrictions on vehicles transporting fertilizer blends, which could help ease logistical bottlenecks and modestly reduce some transportation costs.
Transportation costs rise.
Bulk shipping rates increased toward the end of May on strong demand for iron ore, coal and other commodities in the Pacific. Container rates rose in May as the industry enters peak seasonal demand. Both container and bulk shipping face capacity disruptions from ongoing geopolitical disruptions in the Middle East. The risk of inclement weather conditions from El Niño appears to be rising, which is leading some analysts to expect greater price volatility this summer. Trucking rates increased across van, flatbed and reefer carriers in May, which is typical for this time of year. A surge in demand from agriculture and construction activity, coupled with constrained supply from the CVSA International Roadcheck, drove prices higher. (Truck activity drops during this time, likely driven by drivers seeking to avoid potential regulatory inspections.)
