Diesel and urea prices have soared in Australia as a result of the Iran war, and diesel may rise further as supply is very tight, Rabobank said in a Thursday report.

Diesel stocks in the country are low, although shipments are still incoming and importers are contracting volumes from the US and elsewhere. A reopening of the Strait of Hormuz will be critical to restore supply and bring prices down, the bank said.

Urea prices have increased roughly 50% over the past four weeks as an immediate supply shock to urea exports, together with the secondary impact of elevated natural gas costs, is exerting prolonged upward pressure on pricing, according to the report.

The bank noted that 40% of the world's urea trade typically goes through the Strait of Hormuz, adding that Australia imports most of its nitrogen, which is required for urea production, and is therefore more exposed to the shock than many other agricultural producers.

Meanwhile, grain markets have stabilized after recent volatility, with global benchmarks and Australian prices rising on geopolitical risks and contracting local balances.

Cattle prices remain firm, although the market will need to manage the cost and availability of transport in the months ahead, the report said.