Global Commodities: Oil, gas, and metals kick off a volatile year
At a Glance
The desk believes that the current volatility in the commodities market, particularly in oil and gas, will have significant implications for FX trading strategies. Per the full note from J.P. Morgan, the shift in focus from Venezuelan supply issues to Iranian disruptions, alongside a 25% year-to-date increase in European TTF gas prices, indicates a tightening market. This backdrop suggests a potential for increased volatility in related currency pairs, particularly those linked to commodity-exporting nations. Our consensus target for the EUR/USD reflects this sentiment, with expectations of continued upward pressure on commodity prices influencing currency valuations.
Key Takeaways
- 01Oil supply disruptions of >3 mbd from Iran are a key risk, shifting focus from Venezuela.
- 02European TTF gas prices up ~25% YTD on cold weather, adding to commodity volatility.
- 03Section 232 outcome on critical minerals lacked tariffs, raising correction risk in silver.
- 04Risk-off tone from commodities could support the USD in the near term.
Full Analysis
What the desk is arguing
J.P. Morgan's commodities team warns that oil markets face a potential disruption of more than 3 million barrels per day from Iran, shifting focus from Venezuela. This supply risk, combined with a 25% year-to-date surge in European TTF gas prices due to cold weather, underscores a volatile start to 2026. The desk implicitly rejects the view that recent rallies in metals like silver are sustainable, citing a lack of immediate tariffs in the Section 232 conclusion.
In metals, the Section 232 outcome on critical minerals stopped short of tariffs, which the desk sees as raising correction risk after silver's rally. This suggests a cautious stance on precious metals, while energy markets remain supported by geopolitical and weather-driven factors.
Where it sits in our coverage
Our consensus target for EUR/USD in Dec-26 is 1.12, with a firm spread of 1.08-1.16. J.P. Morgan's commodities view is broadly neutral for FX, but the risk of oil supply disruptions could weigh on risk appetite and support the dollar, aligning with a slightly bearish EUR/USD bias within our range.
Among firms, BofA targets EUR/USD at 1.10, while Goldman Sachs is at 1.15, and Morgan Stanley at 1.14. J.P. Morgan's commodities commentary does not directly challenge these targets, but the risk-off tilt from oil spikes could see the dollar outperform, favoring the lower end of the range.
How other firms see it
Goldman Sachs and Morgan Stanley are broadly aligned with the risk-off interpretation, though their FX targets do not explicitly incorporate oil disruptions. BofA is more contrarian on the dollar, expecting the Fed to cut rates and weaken the greenback.
Our own view sits between these: we see EUR/USD grinding toward 1.12 with short-term dollar strength from risk aversion. J.P. Morgan's oil risk adds a tail risk to that path, potentially delaying the euro's rise.
Market Implications
Heightened commodities volatility, especially in oil and gas, may spill over into FX markets by supporting safe-haven currencies like the USD and JPY, while pressuring commodity-linked currencies like CAD and NOK. The risk of a correction in metals could also weigh on AUD and NZD.
From the original
It has been a busy start of the year for commodities markets. In oil, market attention has shifted from Venezuela to Iran and the risk of more than 3 mbd of supply disruptions. Meanwhile, European TTF gas prices are up by about 25% year-to-date already as colder weather has swept
Related speeches
4 itemsGlobal Commodities: Infrastructure 101
J.P. Morgan's commodity podcast [source] highlights the critical role of infrastructure in assessing recovery timeframes after the Iran conflict, with focus on gas and metals supply chains. The desk argues that damaged processing facilities and logistical bottlenecks will delay normalization, supporting bullish medium-term commodity prices. Consensus is fragmented, with J.P. Morgan's view aligned with gold and natural gas upside but challenged by bearish base metals calls from BofA and Goldman. No major calendar events are imminent, but the May 22 OPEC meeting may provide a catalyst.
Global Commodities: 2026 Outlook – Supply-driven crocodile cycle
The desk asserts that the divergence in commodity price movements signals a significant shift in market dynamics, with supply-constrained metals outperforming energy commodities. Per the full note from J.P. Morgan, this transition reflects a broader 'crocodile cycle' where supply factors increasingly dictate price trajectories. The outlook for 2026 suggests that metals will continue to thrive due to persistent supply constraints, contrasting with the oversupply in energy markets. This perspective aligns with our consensus, which anticipates a continued bullish trend for metals amid a bearish outlook for energy commodities.