The desk anticipates continued volatility in the commodities market driven by geopolitical tensions, particularly in the Middle East. Per the full note from J.P. Morgan Global Research, the ongoing conflict has disrupted key supply routes, notably through the Strait of Hormuz, with oil prices surging to around $110 following President Trump's escalation announcement. Current inventory levels in OECD countries are nearing operational minimums, which could exacerbate price pressures if the conflict persists. This aligns with our consensus target of 1.075 for the EUR/USD, reflecting the intertwined nature of commodity prices and currency movements.
What the desk is arguing
The current state of commodity markets is heavily influenced by escalating conflict dynamics in the region. As the Houthis have formally entered the fray, the targeting of both metals and energy infrastructure is contributing to market volatility and uncertainty regarding future supply stability.
In the past month, geopolitical disruptions have already had a tangible impact on commodities, showcasing the fragile nature of supply chains amid unrest. The lack of a clear off-ramp raises questions about how long this volatility will persist, suggesting traders need to remain cautious.
Where it sits in our coverage
Our consensus target for commodities reflects a cautious but somewhat optimistic outlook, set at 1.075, with a trading range of 1.04 to 1.12. This view aligns with prevailing concerns over supply, echoing the sentiment highlighted by J.P. Morgan in their recent analysis.
Key firms have set their expectations as follows: - JPMorgan: Target of 1.10, tenor Mar-26 - Goldman Sachs: Target of 1.08, tenor Mar-26 - Barclays: Target of 1.07, tenor Mar-26
How other firms see it
Some firms maintain a contrarian stance amid these turbulent times, anticipating potential corrections in commodity pricing as market reactions stabilize. For instance, BofA has set a target of 1.04, suggesting a belief in market overreactions to geopolitical signals.
Conversely, firms like Goldman Sachs and JPMorgan appear more aligned with the sentiment of prolonged volatility, advocating for positioning that reflects potential upward price pressures from continued disruptions.
01Geopolitical tensions are driving elevated volatility in commodity markets.
02The Houthi conflict escalation has intensified supply disruption concerns.
03Traders should prepare for ongoing price fluctuations amidst uncertain geopolitical landscapes.
Market implications
Investors might seek to hedge against potential commodity supply disruptions, leading to increased demand for commodity-related instruments. This could further widen bid-ask spreads as market makers adjust to heightened risk.
Risks to this view
Continued escalations in conflict could lead to abrupt supply shocks, significantly affecting price volatility. Furthermore, unforeseen geopolitical developments can exacerbate market abnormalities and impact investor sentiment.
Hello, and welcome to another episode of At Any Rate. I'm your host, Natasha Kanova, and I head JPMorgan Global Commodities Research. It is a day 34 of the conflict in the Middle East.
On Wednesday evening, President Trump addressed the nation and deteriorated that the military operations in Iran may continue for another two or three weeks. Fennel flows through the Hormuz Strait have not been restored, which remains the central issue for the commodities markets. The Houthis have formally entered the conflict last weekend, introducing a second maritime pressure point in the Red Sea.
In addition, smelters, vessels and energy infrastructure continue to be targeted by strikes. With an expanded geography of the conflict and no immediate off-ramp and side market, volatility persists. To discuss this week's updates and the months behind us, we're joined today by Greg Scheer, who heads our Basin Precious Metals, and Tatar Deboazeh, who leads European Natural Gas.
Greg, Tatar, hello, and thank you so much for joining me again today. So, Tatar, let's start with the natural gas. So could you please walk us through what we're observing at the moment?
So what is the status of LNG shipments? What do we see in Asia-Europe spot competition? Where is the inventory storage level in Europe now that we're already in April?
How should we be thinking about the market? Hi, Natasha, and thank you for having me. So this week, we exited winter officially in the Northern Hemisphere in gas terms, and we finished storages at about 18% in Northwest Europe and at about 28% in wider European Union, which the higher average is led primarily by Italy, which is about 43% full.
But I think it's important to understand here that the part of this Italian reserves is what's classified as strategic reserve, which has never been released. In any case, these levels are very low historically. It's the lowest over the last 10 years, except 2018, when we had very extremely cold winter.
And there is a market's primary focus at the moment on how we fill these storages back to about 80% level ahead of next winter. Arrivals in Europe, LNG arrivals last week increased marginally from week before, and we see this more or less like a change in patterns week over week between Europe and Asia. Last week, as I mentioned, we saw increase in Europe, but we also see increased LNG vessel crossings through Suez Canal, which likely indicates that these are some Asian bound cargo.
So we expect this trend probably to revert again next week. In terms of, there was also an interesting observation within the Arabian Gulf when Kuwait imported two cargos, which was loaded in Qatar. These were most likely loaded from Qatar storages as the operations remain halted.
And this remains more like an isolated exception rather than as some sort of a big change in the market. There are still no LNG vessel that has crossed the Strait of Hormuz since start of the war. There is still the same 17 vessels that we counted at the beginning of the conflict, the same vessel still in the Gulf with no crossings.
And I think this is another important difference between the oil market, for example, when there is a very limited vessels in the Gulf at the moment, which in addition to other factors will delay the molecules of LNG to come to the market compared to oil or other commodities. In terms of like wrap up of last month's price moves, maybe I think to observe gas prices, international gas prices are up about 60% from something like 30 euros to about 50 euros per megawatt hour. Oil prices up about 40%, coal about 15, and the U.S.
Henry Hub broadly unchanged. I think this is an important observation to see the price moves of coal and Henry Hub as compared to international gas benchmarks, which I think highlights that the global coal market is in a much healthier condition compared to last energy shock we had in 2022, which limits this transmission channel, which first of all limits the price moves in the coal itself and also weakens the transmission channel to U.S. gas prices and Henry Hub. As a reminder, the Henry Hub rally in 2022 was largely driven through coal market as international gas markets tightened, leading to tightening coal markets, and then through U.S. power market was the end result, higher Henry Hub prices, which we don't see at the moment.
And even though gas prices are up already 60%, we think this is probably the right level to maintain in summer months. Thank you, Tar. Focusing on energy and with more focus on the oil prices, so we had a very big move in the oil prices today.
So oil rallied, both WTI and Brent rallied to about $110 after President Trump's address to the nation last night. So he promised escalation in the war in Iran over the coming weeks. So the issue for the oil market is that the longer the conflict lasts, the larger will be the impact on the market and the prices.
And in this context, we estimate is that if there is no reopening of the Strait of Hormuz, the OECD commercial crude inventories will hit the operational minimum by early May. And so at this point, the system is not absorbing the shock. It is running down its buffer as well.
Demand is forcibly rationed. How to think about that is that there is a number which is called the operational minimum, which is the floor below, which the systems begin to lose functionality. So by our estimate, that's about 30 days or more with refining throughput cover for the OECD commercial inventories.
We have examples when the system theoretically operated to closer to 24 percent for 24 days for a very limited amount of time. That's the engineering minimum. But doing so would imply severe logistical strain and in practice, a breakdown in the market liquidity.
And again, as the inventories near the threshold, prices, not stocks, become the primarily balancing mechanism. And so for us, the red line in terms of timing is the early May. So hence, the longer the stretches, the bigger the issue will become for the market.
And the second point we wanted to make sure to cover today is the reopening of the second corridor of pressure in the Red Sea. So the Yemen's Houthis rebel have formally joined the escalating Middle East conflict over the weekend. So in general, the immediate implication is geographic, yes, because the conflict is no longer concentrated in the Persian Gulf and around the Strait of Hormuz, but now can extend into the Red Sea.
If you take a look into the Red Sea, in the very north, we have the Suez Canal. In the very south, we have the Bab el-Mandib, which is one of the world's most crucial choke points. Why the Red Sea is so important is because right now, this is the route to bypass the Strait of Hormuz for Saudi volumes, about 5 million barrels per day, slightly under that is being right now rerouted through the Red Sea and the Bab el-Mandib going to Asia.
If the Strait is closed, Saudi can reroute everything through the Suez Canal, but that's about 50 days to the journey. It also requires about 130 additional boats, which are smaller because the Suez Canal, it's shallower. And Saudis are using the very large VOCC boats, so that needs to be rerouted on the smaller boats.
But if the Yemeni Houthis decide to attack the Yarmouk port, pretty much the reroute option will be closed. So we should be paying a lot of attention to that particular region. So Greg, over the weekend, a lot of news in metal space as well.
So we had an attack on two aluminum plants, very large scale aluminum plants over the weekend. Can you please walk us through what should we be looking at? UAE, Bahrain, so it's a little bit different countries that are being impacted.
Also, if you could give us some comments on gold price seems to be extremely volatile. So today, after the announcement from President Trump, actually gold prices are down instead of up. How should we be thinking about that?
Yeah, sure. I think most of the focus on base metals, like you say, is in aluminum. What we saw was a plant in the UAE and a plant in Bahrain targeted on the 28th of March by Iranian missile attacks.
They represent 4% of global aluminum supply. And the big issue that we've been flagging in aluminum is that these plants, you can't just switch off and switch on. They are very finicky.
They take a long time, particularly if you get a sudden power loss, which within hours, you begin to see the infrastructure, the pot line infrastructure begin to freeze. Why that's important is that you have to do significant rebuilds to be able to reline those ponds, possibly rebuild them to be able to re-ramp production up. We're talking about 12-month restart processes.
Throughout the balance of the week, we are still waiting for the official updates from those producers. There have been reports from Bloomberg and others that the plant in the UAE, which is around 1.5 million metric tons of annualized capacity, did experience a sudden loss of power, is not producing. Why is this important?
Well, if those are out for 12 months, along with the other announced disruptions that we have, we're talking about almost 2.9 million tons of annualized supply that is out of the market in aluminum. If we think for the next nine months, for the balance of 2026, that's talking about a potential swing here in the aluminum balance, all else equal to something around 2 million tons of deficit. We're not sitting on that level of inventory buffer.
What we have at the moment, you have a touch over a million tons of stock that is sitting in China. If we look at LMB stocks outside of China, you're sitting on something that's approaching closer to around 500,000 metric tons. We think that this is at a place where you've gone past that event horizon, where you have prolonged disruptions, and where we've been flagging that it is something where supply pressure is immense, and it can easily take the price above $4,000 per metric ton from something around 3,500, where we're trading at now.
On the gold side, honestly, it's been relatively quiet in terms of the inflow coming across my desk. What you've seen, and what I think you began to see, is that we were talking last week about us getting to a point where we are confident that deleveraging has come through. We get the relief rally over most of this week, and then all of a sudden, equities hit another hiccup.
That deleveraging, I think, is weighing on gold. It is keeping that correlation with risk. I think we need to be conscious about the technical levels in equities, but we still do think that you're at a place where you're cleaner in positioning, and then from here, you have a much quicker decorrelation and a safe haven bid in gold if this goes down a path that gets materially much more disruptive.
Greg, thank you so much. Ottar, thank you for joining us as well. What we're observing in the market is very large-scale infrastructure damage in aluminum, which would take about 12 months to recover, removing almost 4% of the global aluminum supply, depleted inventory levels in the European natural gas storages, and rapidly approaching this event horizon, the date of early May for the oil market, when the commercial OECD inventories may be reaching their operational floor levels.
So again, Greg, Ottar, thank you so much for joining me. To our listeners, thank you for tuning into the Commodities Edition of JPMorgan's At Any Rate podcast. We look forward to continue the conversation next week.
This communication is provided for information purposes only. Please refer to JPMorgan Research Reports related to its content for more information, including important disclosures. 2026, JPMorgan Chase & Company, All Rights Reserved. This episode was recorded on April 2, 2026.