Commodities Impacted by the Iran Conflict
An update on a global energy issue. This abbreviated report from Oil Price is written by Alex Kimani. It is abbreviated by me so as to make it an easier and a quicker read at Angry Bear. It is mostly a copy of what has been presented by Oil Price. The link is there if you wish to gather more detail. We can expect increased pricing even if there is no shortage of product. For sure, gasoline prices will increase with every mention of an issue in the Middle East
Globally and the United States will be faced with serious shortages as this war caused by Trump continues. Obviously, he does not know what he is doing and does not really care. Much of the oil product coming out of the area under attack goes to China. They will not be too happy with the United States.
Critics say “The military strikes against Iran and the ensuing blockade were initiated by the Trump administration. Critics and foreign policy analysts argue this escalation was an unnecessary conflict, especially since the administration abandoned the Joint Comprehensive Plan of Action (JCPOA) in 2018”
This report is ~ one week old and is taken from the Oil Price site.
The “Top 5 Commodities Impacted by The Iran War,” OilPrice.com
- The Iran war triggered major disruptions across multiple commodity markets, with crude oil, LNG, fertilizers, petro-chemicals, and aluminum experiencing severe supply shortages, higher costs, and increased volatility.
- Oil and LNG have been hit the hardest, as the Strait of Hormuz disruption has restricted a significant share of global energy flows, tightening markets and raising the risk of prolonged supply deficits.
- Downstream industries are also feeling the impact, with fertilizer shortages threatening food security, petrochemical disruptions driving plastics inflation, and aluminum markets facing their largest supply deficit in decades.
The Middle East conflict is triggering sweeping, multi-commodity supply shocks, profoundly impacting global energy, petro-chemicals, agriculture and shipping industries, among others. The disruption of shipping through the Strait of Hormuz–which handles nearly 27% of the global maritime oil trade–is triggering historic shortages and long-term operational strain on Gulf energy infrastructure. Eestimates that repairing damaged liquefied natural gas (LNG) facilities in Qatar could take up to five years.
Even with ongoing de-escalation efforts, rerouting tankers and the war risk premium are expected to maintain structurally higher pricing floors for energy and refined products.
Here are the top 5 commodities that have been impacted the most by the war in Iran:
#1. Crude Oil: This is the biggest one by far. Roughly 20% of global oil consumption normally moves through Hormuz, including exports from Saudi Arabia, Iraq, Kuwait, the UAE and Qatar. Asian buyers like China, India, Japan and South Korea are especially exposed. Crude oil prices have largely remained headline-driven, taking direction from escalations and de-escalations of the conflict in the near term. Medium- to longer-term prices should be supported by purchases for strategic reserves, a focus on resource nationalism and hoarding, and logistical lags caused by the disruption.
#2. LNG (Liquefied Natural Gas): Qatar is one of the world’s largest LNG exporters, traditionally accounting for roughly 20% of global liquefied natural gas supply. Operating primarily out of the massive Ras Laffan Industrial City, the country supplies critical long-term contracts to major markets in Asia including China, India, and Japan as well as Europe. Nearly all of its LNG cargoes transit Hormuz.
#3. Fertilizers (Urea, Ammonia, DAP): This is one of the most underappreciated risks. Gulf producers are major exporters of urea, ammonia, sulfur, and phosphate fertilizers. Fertilizer production relies heavily on natural gas, both as a fuel and a raw material. Attacks on Gulf energy infrastructure and the Strait of Hormuz blockade–which handles approximately one-third of globally traded fertilizers–has triggered skyrocketing prices for nitrogen and phosphate fertilizers, widespread supply shortages and increased manufacturing costs.
#4. Petrochemicals / Naphtha: The Iran war has severely restricted global supplies of naphtha and petrochemicals, leading to skyrocketing feedstock prices, production cuts at Asian steam crackers and massive inflation in downstream products like plastics and medical supplies.
Naphtha refining margins over Brent crude surged past $400 per tonne in Asia while prices in northwest Europe soared over $900 per ton. Because naphtha is the core building block for plastics, derivative markets have suffered massive inflation, with polyethylene and polypropylene prices on the Dalian Commodity Exchange surging over 35% while global plastic resins have jumped more than 30%.
#5. Aluminum: The global aluminum market is currently facing an existential supply crisis triggered by the Middle East conflict. The global aluminum market is facing its largest supply deficit in over 25 years, driven by military conflict involving Iran. A critical mix of missile strikes on major Middle Eastern smelters and shipping blockades has knocked out up to 5% of global output. The ongoing shipping blockade chokes off 23% of the aluminum exported outside of China and also halts the inbound maritime flow of vital raw materials like alumina and carbon bauxite. Wall Street is now projecting a refined aluminum deficit of at least 2 million metric tons by the end of 2026.
The report is one week old and things may have changed since this report was published by Oil Price.