By Reshma Kapadia
The closing of the Strait of Hormuz during the Iran war has brought into focus the fragility of the global supply chain, with rising oil prices getting most of the attention.
The Hormuz bottleneck, however, has cascading effects, and a pair of economists Thursday drew attention to one of them: a worldwide sulfur shortage. It should come as no surprise. Sulfur is a byproduct of oil and gas production, and the war has curtailed shipments, leading to shortages.
Sulfur is critical for food producers and metals miners around the world. The ramifications of the shortage, and subsequent price spikes, are pushing countries in Asia to take steps that can make it worse for others. China, for example, is reportedly planning on restricting exports of sulfuric acid, which is used in metals mining and production, starting May 1.
Paul Bloxham and Jamie Culling, HSBC economists for global commodities, detailed the impact of the sulfur shortage in a note on Thursday.
The Middle East makes up about a quarter of global production and nearly half of global seaborne sulfur trade, they wrote. Prices are up 40% since mid-February, to about $600 per metric ton.
About 80% of sulfur is converted into sulfuric acid -- and about 60% of that is used in fertilizers, almost a fifth in industrial uses and 14% in chemicals. The takeaway: The shortage has far-reaching impact, on fertilizer producers and ultimately food prices, but also copper and nickel producers and semiconductor makers, according to the economists.
For copper, about a fifth of global supply is made using a process that relies on sulfur. With a $100 per ton increase in sulfur prices estimated to increase operating costs by 4%, the economists note that copper production costs have increased since mid-February by about 8%.
Nickel and cobalt processing are also seeing higher costs because sulfur is used in high-pressure acid leaching. The HSBC economists cite estimates that a 10% rise in sulfur price translates to a 6% increase in production costs for nickel.
Indonesia and Chile, along with commodities producers in Africa, are likely to feel the most pain. Indonesia, the world's biggest nickel producer, imports almost three-quarters of its sulfur from the Middle East.
Chile, which is the world's biggest copper producer and largest sulfuric acid importer, could also feel a hit as it gets about 37% of its sulfuric acid from China.
As policymakers are faced with making tough choices, they may opt to prioritize food security and sulfur for fertilizers over metals producers. China has taken similar steps before to preserve food security.
"Beyond simply a cost impact on metals production, this could see metals producers starting to cut back on output or take maintenance downtime in coming months," the economists write. Copper and nickel are used in battery technology and electrical infrastructure, making them essential to the transition to renewable energy. Increased prices would be a setback at a time when war has countries accelerating efforts to diversify into renewables and nuclear.
The U.S. stock market has been relatively sanguine about the fallout from these shortages, but economists caution it could take a bit of time until the full ramifications are seen in the economy.
"There will be significant lags behind in the effects these supply chain disruptions will have on growth and inflation," the economists write.
Sulfur is just one of the critical chemicals resulting in higher prices but emblematic of what is happening elsewhere with helium, natural gas and urea. The International Monetary Fund last week warned that each day the war continues, the closer the global economy moves toward its worst case scenario of a global recession, with growth of just 2% this year, and inflation of as high as 6%.
Dario Perkins, managing director for global macro at TS Lombard, in a note to clients Thursday says the war adds to his view that inflation has settled at higher levels, with the old 2% target now the floor not the ceiling -- and it's likely to be a lot more volatile.
That could be a warning for stocks. Periods of higher inflation come with weaker returns in the S&P 500 and in investment-grade and high-yield indexes, as policymakers shift to higher interest rates, according to a note from Apollo Group's Torsten Sløk.
For now, many central banks are on hold -- but that's a turn in itself from expectations earlier in the year for central banks to lower interest rates, not just in the U.S. but elsewhere.
Write to Reshma Kapadia at reshma.kapadia@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
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April 23, 2026 13:47 ET (17:47 GMT)
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