War in the Gulf Upends Global Commodities

Apr. 06, 2026 07:55AM PST

As the conflict drags on, the only certainty is that the continued blockade of the Strait of Hormuz will continue to force aggressive, volatile repricing across the entire global resource market.

US and Iran flags wave against a cloudy, dark sky.
efks / Adobe Stock

Five weeks into the US-Iran war, global commodities markets are fracturing under the strain.

Physical supply shocks and blockaded shipping routes have sent prices for key resources soaring, while fears that skyrocketing energy costs will spark a global recession are ramping up.

With uncertainty running high, investors are bracing for an extended conflict with no clear diplomatic resolution.

No quick relief for high oil prices

Oil market developments are driving much of the current volatility. Prices have skyrocketed since the US and Israel launched strikes on Iran on February 28, leading to retaliatory actions and the effective closure of the Strait of Hormuz — a maritime chokepoint that normally handles more than 20 percent of the world's oil supply.

In volatile trading last week, West Texas Intermediate crude jumped 10 percent to breach US$110 per barrel. Brent, the international benchmark, rose 6 percent to trade above US$108. Brent crude rose more than 60 percent in March alone, marking its biggest monthly price gain since records began in the 1980s.

The most recent surge follows an April 1 address by US President Donald Trump.

While he paused attacks on Iranian energy facilities until April 6, he pledged further "extremely hard" strikes in the coming weeks and offered no structured path to a ceasefire.

Regarding the critical shipping lane, Trump merely stated, "The strait will open up naturally."

The lack of a diplomatic resolution has forced markets to price in an extended conflict.

“The Gulf conflict looks set to extend well beyond three weeks. Even if the United States withdraws, Iran can continue the fight,” Simon Evenett, professor of geopolitics and strategy at Switzerland’s IMD Business School, told CNBC.

“Claims that Tehran’s capabilities have been obliterated are overstated. Iran can sustain a stranglehold on the Strait of Hormuz. Oil prices would rise sharply. Physical shortages will emerge. Demand destruction becomes a necessity.”

That demand destruction may arrive sooner rather than later.

In the US, the national average for unleaded gas has hit US$4.08 per gallon, up from US$2.98 before the conflict. Diesel sits at US$5.51. In Europe, eurozone inflation surged to 2.5 percent in March.

Aluminum smelters take direct hits

Benchmark three month aluminum on the London Metal Exchange (LME) rose 5.9 percent to reach US$3,492 per metric ton at the start of last week, pushing toward a four year peak.

The rally was sparked by last weekend's Iranian missile and drone strikes, which targeted two major smelters: Emirates Global Aluminium (EGA) in the UAE and Aluminium Bahrain (Alba).

The Middle East produces about 9 percent of global aluminum supply. EGA and Alba are among the world's largest single-site smelters, each producing roughly 1.6 million metric tons last year.

The attacks caused a loss of power at the EGA site, forcing an uncontrolled shutdown of its smelting potlines. In aluminum production, a sudden loss of power causes the metal to solidify inside the circuits, resulting in catastrophic damage that takes immense time and capital to repair. Alba has already begun shutting down lines representing 19 percent of its capacity, while EGA confirmed its plant sustained "significant damage."

With LME-approved warehouse stocks already down more than 60 percent since last May, a sustained outage in the Gulf will leave manufacturers across Europe, Asia and the US scrambling for supply.

Copper’s tug-of-war

Copper is caught in a tug-of-war between the threat of a global recession and impending production bottlenecks.

When the war first started, the metal was crushed.

Between February 27 and March 23, the LME price of copper slid 9.4 percent to US$12,081.74 per metric ton. Investors sold off the metal on fears that high energy prices would stall the global economy; meanwhile, global inventories surpassed 1 million metric tons for the first time since 2003.

However, copper has recently clawed back some losses, reaching a two week high of US$12,365 per metric ton on April 1. This bounce in prices was driven by brief hopes of a war de-escalation, supported by strong Chinese manufacturing data and a drop in Shanghai Futures Exchange inventories.

But copper faces a hidden supply threat from the Gulf war: sulfuric acid.

The Middle East accounts for almost half of the global sulfur trade, much of it moving through the Strait of Hormuz.

Sulfur is essential for producing sulfuric acid, which is used in the solvent extraction/electrowinning (SX/EW) method that accounts for 16 percent percent of global copper production. Robert Friedland, founder and executive co-chair of Ivanhoe Mines (TSX:IVN,OTCQX:IVPAF), posted a warning on social media on March 4: Should "the disruption last longer than ~3 weeks, copper oxide operations will have to close as they've run out of acid."

Gold, silver prices sell off

So far, one of the biggest shocks in the commodities sector is the downtrend in gold and silver.

Historically, investors flock to precious metals during geopolitical crises. This time, they are selling them off at a historic pace — during March, the gold price fell more than 10 percent, recording its biggest monthly drop since June 2013, while silver dropped 19 percent, its worst month since 2011.

The selloff is being driven by the bond market. Surging oil prices have cemented fears of persistent inflation, prompting expectations that central banks will keep interest rates higher for longer.

As a result, the US dollar has strengthened, and 10 year treasury yields have spiked to 4.37 percent.

High interest rates increase the opportunity cost of holding non-yielding assets like gold, while a strong dollar makes bullion more expensive for foreign buyers.

The drop is also being fueled by panicked funds liquidating positions to cover margin calls in the stock market.

Despite the crash, some major banks see a floor. Analysts at Goldman Sachs (NYSE:GS) wrote in a note that they are still constructive on gold: “Our base case assumes no further private sector liquidation of gold nor any additional private sector diversification in gold (beyond the modest boost from Fed cuts).”

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Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.

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Giann Liguid

Giann Liguid

Writer

Giann Liguid is a graduate of Ateneo De Manila University with an AB in Interdisciplinary Studies. With a diverse writing background, Giann has written content for the security, food and business industries. He also has expertise in both the public and private sectors, having worked in the government specializing in local government units and administrative dynamics.

When he is not chasing the next market headline, Giann can most likely be found thrift shopping for his dogs.

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Giann Liguid

Writer

Giann Liguid is a graduate of Ateneo De Manila University with an AB in Interdisciplinary Studies. With a diverse writing background, Giann has written content for the security, food and business industries. He also has expertise in both the public and private sectors, having worked in the government specializing in local government units and administrative dynamics.

When he is not chasing the next market headline, Giann can most likely be found thrift shopping for his dogs.

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