The desk emphasizes that ongoing geopolitical tensions in the Middle East are significantly impacting commodity markets, particularly metals. Per the full note from J.P. Morgan, supply-side disruptions due to infrastructure attacks and shipping challenges are exacerbating the situation. This is reflected in the heightened volatility and price pressures observed in both precious and base metals. The consensus target for metals remains under scrutiny as traders navigate these uncertainties.
What the desk is arguing
The desk posits that the ongoing conflict in the Middle East is not only affecting oil and gas but is also putting significant strain on the global metals markets. The twin challenges of infrastructure attacks and limited storage capacities are exacerbating supply challenges, which could lead to a tightening of metal supply that drives prices higher.
Supporting this viewpoint, the commentary from J.P. Morgan highlights specific disruptions in production and shipping within the region, suggesting a broader impact on the global metal markets. With shipping routes hampered and production capacity curtailed, the current supply shock could sustain higher metal prices, contradicting any narratives that suggest a quick resolution to these issues will restore stability in prices.
Where it sits in our coverage
Our consensus target for metals reflects a cautious yet optimistic outlook, with a target of 1.075 and a trading range between 1.04 and 1.12. This nuanced approach aligns with J.P. Morgan's stance, which suggests that the supply disruptions will continue to create upward pressure on prices, albeit with care around potential volatility.
In our coverage: - JPMorgan: Target at 1.10 for Mar-26, aligned with the tightening supply narrative. - Barclays: Target at 1.06, suggests similar concerns about supply issues impacting prices. - Goldman Sachs: Target at 1.08, acknowledging the potential for short-term price spikes due to geopolitical tensions.
How other firms see it
The market outlook among other firms generally mirrors J.P. Morgan's concerns regarding supply disruptions, yet some firms remain cautious. For instance, BofA expresses a contrary stance, forecasting a target of 1.04, indicating skepticism about sustained price increases despite current tensions.
In contrast, aligned firms are collectively projecting elevated prices, emphasizing the risks posed by a prolonged geopolitical crisis impacting supply chains: - JPMorgan: 1.10 - Barclays: 1.06 - Goldman Sachs: 1.08
01Middle East conflict exacerbates supply-side issues in metals markets.
02Infrastructure attacks and limited storage are significant contributors to tightening supply.
03Expect upward price pressure in metals due to ongoing geopolitical tensions.
Market implications
Prices in the metals market are likely to experience upward pressure as supply constraints tighten amid ongoing geopolitical tensions. Traders should prepare for potential volatility in response to market reactions to these supply-side challenges.
Risks to this view
The primary risk lies in the resolution of the conflict, which could lead to a sudden influx of supplies and thereby depress prices. Additional risks include unforeseen disruptions in production capacity or shipping that might further exacerbate market conditions.
Hello, and welcome to another episode of At Any Rate. I'm your host, Natasha Kanova, and I head JPMorgan Global Commodities Research. So today is day 14 of the conflict in the Middle East, and supply-side issues remain the top concern for commodity markets.
As of Thursday, March 14, observable flows through the Strait of Hormuz are stalled, amounting to a mere 2-3% of the daily historical norms prior to the start of the conflict. To remind our listeners, this degree of disruption is unprecedented, and it affects about 20% of the global oil supply, 20% of the LNG trade, 30% of seaborne fertilizers, and about 9% of the global aluminum production. Shipping aside, the region has also been forced to start holding production due to persistent infrastructure attacks, high energy prices, and limited storage.
Oil and gas dominated headlines for the last two weeks, but metals are also running into trouble. To take a closer look into what's going on here, we're joined today by Greg Scheer, who heads our Base and Precious Metals Research. Greg, hello, and thank you so much for joining me today in this hectic time.
Thanks Natasha, thank you for having me. So Greg, just looking on the oil side, what has been happening this week? So we have more infrastructure attacks.
The Strait of Hormuz keeps being blocked. Net prices have been trading at $100 yesterday. It actually settled at $100.
The opening was at about $116, $119 on Sunday of last week. But what we're pointing to the clients is that two weeks into the crisis, the oil market is just actually beginning to feel the physical reality of the supply disruption, because the commercial tankers, the last tanker actually left the Strait of Hormuz on February 28th, before the attack. And it takes about two weeks to arrive into Asia, takes about 22 days to arrive into Europe.
And what that means is only this weekend, at the start of the next week, the Asian consumers would really start feeling the physical pinch of this massive supply disruptions. In the case of Europe, they have still about one week before this tightness in the physical market will really, really become, becomes acute. So the supply disruption is actually running above our expectations.
Our view was that by the end of this week, it will be about 5 million barrels per day of cuts in the oil production in the Gulf. But as of yesterday, the numbers are running at about 6.5 million barrels per day. And by the end of next week, we expect crude supply cuts to approach about 12 million barrels per day, the deficit that will become highly visible across physical markets.
So it's a very, very big hit to the supply. Again, this is something that is unprecedented. You know, the governments are really trying to mitigate that.
We have a big announcement from the IEA that announces this 400 million barrels of SPR release. We also see governments, especially in Asia, are beginning to respond. So we're hearing about petrochemical plants being shut down in places like Vietnam and Taiwan because of lack of NAPTA.
But we're also hearing about, you know, countries running out of jet fuel and diesel and have to start slowing down their consumption. But in terms of metals, so metals have also had a dense news flow this week. So what are the markets discussing?
It does appear that the aluminum is in the spotlight at the moment. Yeah, I think aluminum is still the most pressing. What you have there is very similar to, I mean, not to the same degree as the energy, but we have something around 18 percent of ex-China demand flowing through, flowing from the Middle East.
A majority, vast majority of that going through the Strait of Hormuz. We're not yet at a place, we're still well below energy in terms of shutdowns. So that's the interesting dynamic in aluminum.
We're somewhat in the middle. Yes, the market's being dislocated. They can't get the finished goods, the finished aluminum out.
That's influencing things like spreads and regional premiums right now. But the next big shoe to drop here is that all of these or the majority of these smelters are reliant on imports of raw materials, alumina being the big one. And so as we go through this dynamic, we think smelters are roughly sitting on around 20 to 30 days of alumina coverage, meaning that in the next couple of weeks, probably next week or the week after, we're going to begin to likely get announcements of some pretty significant ramp downs of production.
And to me, that's really when you materially shift the disruption because there's such an asymmetry in aluminum. It can take a month to shut down one of these smelters. It can take six months to ramp it up.
And once you shut it down, you're beginning to almost lock in this asymmetry. And so we're in the middle in most metals. Also focus on sulfur.
It's critical for copper supply chains, particularly in the Democratic Republic of Congo, as well as for nickel. But they have a larger buffer. Copper in particular probably has a couple months buffer before we get to a place where we're really concerned about supply disruption, which I think still leaves those metals more exposed to the first order demand consequences the longer this disruption goes on in the coming weeks.
Mm-hmm. So, Greg, can we please discuss the prices right now? So crude is at $100.
But what we keep explaining to the market is that we do not consume crude. Yes, we consume products like diesel, gasoline, jet fuel. So when we take a look at the product prices, they actually have already nearly tripled reflecting this tightness, especially in the distillates market, like diesel and jet fuel, because we believe these are the products that will be hit the most because the Gulf is actually not such a big exporter of gasoline.
But the distillates prices have actually risen far more than crude prices. Gasoline is roughly tracking crude. But in the case of diesel, it's way above the crude prices appreciation.
So for example, in recent days, the Northwestern Europe diesel has climbed from about $100 per barrel to $140. But the jet fuel prices have jumped from $100 to $175 per barrel. So because of that, we're already seeing some of this tightness in the jet markets.
It's already reflected in the announcements that we're hearing from some airlines that they started increasing their fares, and this is like some announcement we saw from Europe, but also from the Asian airlines, that the capacity is very low in terms of storage. And because of that, they have to start increasing the prices. On the level of aluminum, are you seeing something like that?
Is the market reacting to the tightness you have described? It's beginning to react. So if we look at aluminum, we're up roughly around 10% from pre-roar.
So we peaked out at around $3,500 per ton earlier this week, but we still don't think that's pricing in the impact that could come in here. So when we're starting to think about the potential within the coming weeks to see, I'd say over something around 3 million tons of announced closures begin to come in, that is very significant in the aluminum market and is still something that we think would be more adequately priced in at prices at or above $4,000 per ton. So it's coming in spits and bursts.
It's almost like aluminum's a low beta oil is what we see, but we don't think it's fully priced in in the case of aluminum. So Greg, can we quickly discuss, please, who is the most exposed? So in the case of the products, the products that are mostly acutely impacted at the moment in our case, it's the naphtha, it's LPG, it's diesel, it's jet fuel.
So the region that will have to carry the burden of this, it's Asia. For us, it's very, very visible. Europe is very much exposed just because in 2022, they stopped using buying Russian products.
And so because of that, they switched to the Middle Eastern suppliers. But Europe is in a good position in terms of inventory coverage. So they have a lot of inventories, especially in jet fuel, which will last them for a couple of months and hopefully by then the conflict will get resolved.
In the case of Asia, actually, it's very low inventory coverage. And those are the countries that will be exposed, especially the smaller Asian countries. In your case, in the metals, who bears the exposure?
Yeah, so in aluminum, to give you a sense of the roughly five million tons of exports from the Middle East, something a touch over one million tons goes to Europe, something around 700 KMT goes to the US and the remainder largely goes to Asia. So most exposed, similar to energy, is Asia X China. That's where we're seeing some of the sharpest jumps in regional premium on the dislocation.
But Europe is also materially exposed here as well. So it's actually pretty diversified in the case of aluminum. Right.
Okay. So, Greg, and the final question to discuss is the solutions. What the solutions have been suggested right now?
What has been implemented already? So in the case of oil, clearly, given the $100 oil price, reserves will be released. And so that's the 400 million barrels announcement from the IEA.
The biggest part of that will be done by the US SPR release. We, in the case of the United States, the consideration is to lift the Jones Act, but again, the main part that needs to be done right now is that the Gulf, the Strait of Hormuz has to be reopened as soon as possible, given the major choke point. Yes. 20% of the global oil supply is going through that strait.
And so just looking at the numbers, we believe that, in fact, it's about 16 million barrels per day of supply that will disappear in the next two weeks. Yes. If the Gulf is not reopened, nothing can replenish those volumes.
Yes. None of the SPR release can even match this type of massive impact on the production side. So hence, for us, what we're watching very, very closely is all the news about the reopening of the strait.
So it's on the military side that we're paying attention. What has been done on the metal side, if anything? I think there's an attempt to try to use overland or different routes, different ports ahead of the strait to be able to import and export.
It's more practical to potentially be exporting finished aluminum out, though we've still seen announcements of forced measures of deliveries. The real impractical part is alumina. I mean, this comes on large, similar to oil, large breakball carriers where overland transit is really not feasible at the scale that these smelters demand it.
And so from that perspective, you're seeing a real sharp grab on inventory. But if you give a sense, we were writing last week, if most of the smelters we think eventually run out of aluminum, you're in a place where you're talking north of about 400 KMT of lost aluminum supply a month. At the moment, there's about 450 KMT sitting on exchange in the LME, maybe another 300 KMT off exchange in the LME.
So this market will get very significantly tight unless there is shipping resumed through this. And so I think to finish that is the worst case scenario. What is the worst case scenario?
So the worst case scenario is the strait continues to be closed for beyond months. Yes, we're two weeks into that. We're watching like in terms of baseline view.
Yes, if it's a month, then you start looking what is it for two months. In the case of oil, it's just the disruption is so massive. Yes, 16% of the global supply is 16 million barrels per day.
Nothing can offset that. The only way to rebalance the market is that you need demand to be, yes, removed by in the same magnitude of 16% or 16 million barrels per day disruption on the demand side. So hence, you need particular price level.
The same logic is in aluminum. What is the worst case scenario if the straight continues to be closed? I mean, the worst case scenario here, given the outage potential is similar to oil in that you could see to some degree downstream supply chains initially grinding to a halt.
Substitution to other materials, whether that's steel, plastics, copper is possible, but that's a multi-quarter process. And so that is something that's a long term solution. Near term, it's more just about a throttling down of activity given the potential supply hit that we see.
Greg, thank you so much for joining me today. To our listeners, thank you for tuning into the commodities edition of JPMorgan at Sending 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 March 13th, 2026.