CF Industries (CF) and Nutrien (NTR) are set to follow diverging paths through the 2026-28 nitrogen cycle as the Middle East conflict reshapes global supply, keeps 2026 prices above marginal cost, and delays market normalization until 2028, Morgan Stanley said Wednesday in a report.

Since the conflict began, CF shares had gained about 35%, compared with roughly 3% for Nutrien, as equity markets efficiently priced in the 2026 tightness for CF, while Nutrien's broader portfolio left some investors concerned that higher nitrogen costs may pressure spending in other segments, the report said.

Morgan Stanley expects CF to benefit more directly from elevated nitrogen prices through 2026, while Nutrien's upside is tied to a slower, portfolio-wide recovery as the market normalizes into 2027-28.

The Iran conflict has created "greater disruption and complexity" than previously expected, and despite a two-week ceasefire, uncertainty remains around how quickly LNG and urea production and logistics can normalize, the report said.

Morgan Stanley boosted its price target on CF stock to $135 from $95 and maintained its equal-weight rating. It increased its price target on Nutrien shares to $93 from $77 and reiterated its overweight rating.

CF shares fell 10% in Wednesday trading, and Nutrien dropped 4.4%.

Price: 120.48, Change: -13.31, Percent Change: -9.95