Global Commodities: It costs a lot
Per the full note from J.P. Morgan Global Research's 'At Any Rate' podcast, the Strait of Hormuz disruption is now spilling beyond energy into agricultural commodities, where high freight rates, fuel costs and disrupted logistics are converging into a structural input-cost shock. The desk's headline data point is stark: total oil flows from the region have fallen from 90% to 83% of pre-war levels, and while the IEA has committed to releasing 100 million barrels of crude and products, the pace of release — and the diesel split within it — remains undisclosed. Host Greg Scheer, who heads base and precious metals research at J.P. Morgan, frames this alongside a bullish copper call above $15,000/metric ton on China import needs and elevated supply risks, with the desk explicitly expecting copper-aluminum divergence into 2027. Agricultural strategist Tracy Allen joins to argue that ags are the sector where all these cost vectors converge, and the risks ahead skew to the upside for input costs. With no internal FX consensus targets tracked for this commentary and no high-impact calendar events in the next 30 days, the tradeable read is thematic rather than pair-specific: watch diesel tightness, freight rates, and the copper-aluminum spread as the cleanest expressions of this thesis.
What the desk is arguing
Per the full note from J.P. Morgan Global Research, the desk's thesis is that the Strait of Hormuz disruption has evolved from an energy story into a broad commodity cost shock, with agricultural markets as the primary point of convergence. The desk frames this as a logistical and input-cost problem rather than a pure supply problem — freight rates for tankers and trucks, fuel costs, and the cost of operating heavy machinery are all feeding into ag production economics simultaneously. Host Greg Scheer, who heads base and precious metals research at the firm, opens the episode by noting that attacks on vessels and infrastructure have dampened total oil flows to 83% of pre-war levels, down from 90%.
The supporting evidence the desk leans on is threefold. First, the flow data: oil flows at 83% of pre-war levels is a material, quantifiable disruption. Second, the IEA's 100-million-barrel SPR commitment — announced but with no disclosed pace of release and no clarity on how much diesel is actually included. Diesel is the swing input for agriculture, heavy machinery, and trucking, so the opacity on the diesel split is itself a risk premium. Third, the copper call: J.P. Morgan reiterates a bullish stance above $15,000/metric ton on China import needs plus elevated year-end supply risks, and expects continued copper-aluminum divergence into 2027.
The counterfactual the desk is implicitly rejecting is that this is a contained energy-sector event. The alternative read would be that SPR releases and OPEC spare capacity cap crude, freight rates normalize, and ag input costs mean-revert — leaving the ag complex range-bound. The desk is arguing the opposite: that logistics disruption and diesel tightness create a slower-burning cost pass-through that outlasts the headline oil move.
How other firms see it
Thematically, the aligned camp is anyone positioned for a sustained commodity cost-push — the desk names no FX pairs, but the read sits closest to inflation-hedge and commodity-currency longs. The contrary camp would be those treating the Hormuz disruption as transient, expecting SPR releases to cap crude and freight to normalize, which would unwind the ag input-cost premium. Watch USD/CAD and AUD/USD for the commodity-currency spillover, and keep an eye on diesel cracks and Baltic freight indices as the cleanest real-time proxies for whether the desk's convergence thesis is playing out.
What the calendar says
No high-impact events are scheduled in the next 30 days for the relevant jurisdictions, so the near-term catalyst path runs through the IEA's undisclosed SPR release schedule and any escalation in Strait of Hormuz vessel attacks rather than a dated data print.
Key takeaways
- 01J.P. Morgan flags agricultural commodities as the convergence point for high freight rates, fuel costs, and disrupted logistics stemming from the Strait of Hormuz — not just an energy story.
- 02Total oil flows from the region have fallen to 83% of pre-war levels, down from 90%, per the desk's own data.
- 03The IEA's 100-million-barrel SPR commitment lacks both a pace-of-release schedule and clarity on the diesel split — the diesel opacity is itself a risk premium for ag input costs.
- 04The desk reiterates a bullish copper call above $15,000/metric ton and expects continued copper-aluminum divergence into 2027 on China import needs and supply risks.
Market implications
Watch diesel cracks and tanker/truck freight rates as the real-time proxies for whether the ag input-cost convergence thesis is materializing — both are the transmission channel the desk identifies. The copper-aluminum spread is the cleanest metals expression of the same thematic, with J.P. Morgan's above-$15,000/metric ton copper target and 2027 divergence call as the anchor. With no calendar events in the next 30 days, positioning signals and any IEA schedule update are the primary near-term catalysts.
Risks to this view
The call is invalidated if the IEA publishes a front-loaded SPR release schedule with a heavy diesel component, which would collapse the input-cost premium in ags and freight simultaneously. A de-escalation in Strait of Hormuz vessel attacks would also unwind the logistics disruption narrative, normalizing tanker and truck rates faster than the desk expects. Finally, a demand-side shock in China that undermines the copper leg of the thesis would remove one of the three supporting pillars the desk leans on.
Hello, and welcome to another episode of At Any Rate. I'm your host, Greg Scheer, and I head up base and precious metals research at J.P. Morgan.
This week, attacks on vessels and infrastructure in the Middle East have intensified, dampening total oil flows from 90 to 83% of pre-war levels. Discussions also focused on the scale and timing of the IEA's SPR release, especially for diesel, where the market is especially tight. While the IEA committed to unlock 100 million barrels of crude in products, there were no updates on the pace of release or how much diesel will actually ultimately be included.
The situation in the strait is not exclusively affecting the energy market, as you know. Higher fuel prices, vessel attack, and constrained logistics have contributed to a surge in freight rates for both tankers and trucks, as well as the cost of operating heavy machinery. One sector where all of these converge are agriculture markets.
Today, we want to discuss the input cost pressures on ags and the risks ahead for these markets with Tracy Allen, who leads our agriculture commodity strategy. Tracy, thank you for joining. Before jumping into the agriculture markets, though, let's first run some updates on the metal side.
This week kicks off LME Week here in London, a busy week full of meetings with producers, consumers, and investors across all base metals markets. We think one of the major themes is going to be on the divergence that we think is going to continue between copper and aluminum prices as we look to 2027. On the copper front, as we've been discussing a lot throughout this podcast over the last two years, it's a market in major dislocation, and we think this is set to continue.
As we look to the balance of this year in early 2027, we remain bullish, seeing prices rising to above $15,000 per metric ton. Ultimately, we think China import needs combined with supply risks, which remain elevated into the year end, are going to keep a high floor under this market. There is a lot of debate about what US import demand, which has been influential to this copper price formation over the last two years, is going to look like in 2027, but little conviction about that, so expect a lot of discussions and differing viewpoints.
Ultimately, we think China stays in this market, and this is a market that outside of the US is running on extremely low inventory coverage, keeping a high floor under prices. On the other side, aluminum is different. Ultimately, oversupply is incoming.
This year has been quite dynamic. We've seen large outages and recoveries at Middle Eastern smelters, but as those Middle Eastern supplies begin to more fully recover as we get into 2027, it's entering a market where Indonesia's supply growth has grown immensely, which is quickly flipping the primary aluminum market into oversupply. It's not that the market doesn't need these tons eventually, it's a timing mismatch.
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