Global Commodities: Oil, gas, and metals kick off a volatile year
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.
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.
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.
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.
Risks to this view
Oil supply disruptions lower than feared could reduce risk premium, while a deeper correction in metals might spread to broader risk sentiment. Additionally, a warmer European winter could reverse gas price gains.
Hello, and welcome to another episode of At Any Rate. I'm your host, Natasha Kanova, and I head JPMorgan Global Commodities Research. It was a very busy week for the commodities.
Metals market had spiked higher early in the week with copper and gold reaching new records, but prices steadied and then fell at the end of this week as news of a Chinese clampdown on high-frequency trading caught sentiment. In the case of gas, European gas prices surged almost 30% this week amid bouts of unusually cold weather in Europe, Asia, and similarly in the United States, and oil is set to end the week with a small gain after surging from January 8th on concerns that the U.S. would strike Iran, OPEC's fourth-largest producers. To discuss the markets, to discuss the news and the views on the market, I'm joined today by my colleagues, Greg Scheer, who heads our metals team from London, and Otar Deboadze, who covers our European natural gas and global gas markets.
Otar, Greg, welcome. So Greg, let's start with metals. A lot of volatility this week, not just in the industrial metals and base metals as well.
The biggest news is about Section 232 and investigation into critical minerals. First of all, if you could please just walk us through what is Section 232? Why is it so important?
Why does it have such a big weight in silver and gold prices, I'm sorry, in copper prices? So why we're watching that so closely? Yeah, sure.
Thanks, Natasha. So Section 232 is basically a statute of law that the president can use to have the Secretary of Commerce investigate imports that could potentially threaten national security of the United States. So it's a process where they do an investigation that's delivered to the president.
And then on the back of that, the secretary recommends actions that the president could take to address the concerns if it does indeed threaten national security and the views of the government. Why is it important? Well, this is in commodities markets and particularly in metals markets, even in Trump's first presidency, this has been quite a big tool that they've looked in a way of potentially putting in tariffs to boost domestic production.
So it started all the way back with aluminum in the first Trump presidency. That's kind of resurfaced again in the second Trump presidency. We have a 50 percent tariff on imports of primary aluminum into the U.S., lots of noise throughout 2025 around a copper tariff.
They ultimately don't do a copper tariff under Section 232 on refined copper. And then we have this critical minerals report, which was initiated last April and basically came to a head this week. So what we got was, you know, the president reviewed the report, said he does concur that with the findings that imports of critical minerals do pose a threat to national security, but they stopped short of imposing any direct import tariffs on any of the minerals on the critical minerals list.
And so it was a much more surgical, much lighter touch. Instead of immediate tariffs like we've seen in the past, it lays out a plan to pursue bilateral negotiations and potentially, you know, down the road floats alternative remedies like price floors. Now, the total threat of tariffs is not removed.
There's still a mention of it that if these negotiations don't go, you know, the way the U.S. is expecting that there could be tariffs down the road. But we do think it reads as close to one of the least disruptive outcomes that could have come out of this investigation. And it reads very differently, for instance, relative to the copper 232 executive order, which we got last summer, which, you know, immediately implemented a 50 percent tariff on downstream copper products and much more explicitly laid out a potential phased import tariff on refined copper imports after a review period in 2026.
So relatively light touch. Why does it matter for these precious metals markets quite a lot? Is because what you have seen since the election of President Trump is a movement of physical metal from London into the United States to hedge the basis risk of there potentially being a tariff on U.S. imports, which would rebase U.S. based prices, futures prices of these these metals.
And when we're talking about it, particularly silver, platinum and even palladium. So what what it means going forward is let's start with silver, because I think that's the biggest one here. Long story short, you're still sitting on something around one hundred and twenty five million ounces of silver inventory in the U.S. that has been built since President Trump took office for the second term.
And we have been already seeing silver moving back into the London market. But this, in my view, does alleviate some of the concerns here of a more immediate tariff and allow for a larger flow eventually of silver back to London, which I think is critical because part of this, you know, the reason we've gotten this sweltering rally in silver, particularly in the second half of this year, has been very, very tight, illiquid physical markets in London. And so, you know, with silver prices here now still sitting up close to ninety dollars per ounce, we do think there are some flags being raised here and warning signs to this rally increasingly in the last couple of weeks.
A, we're going to begin to see this unwind. On top of that, we're seeing a bit of a divergence in terms of since Christmas, we've been seeing outflows from ETFs. So, you know, the last almost twenty dollars per ounce of this rally has not been accompanied by ETF inflows, which is something that is a pretty stark difference than what we saw over the course of twenty twenty five.
Like you mentioned at the top, we're also seeing China taking a much more active stance at trying to curb some of the frenzied investment activity we've seen in the country. So in the very near term, you know, we're kind of beyond all technical levels. Is there upside, you know, for this rally to continue?
Yes. But we do think as we look kind of over the average of this quarter and next quarter, that there are some serious sort of warning signs that are being raised here as we as we look to silver and do think, you know, within that regards are still much more focused on the clean story in gold. You know, it doesn't have this tariff noise in it, but it plays the themes that, you know, we're worried about over the coming months, including, you know, a tariff ruling.
What does that do for the deficit? U.S. government shutdowns, Fed independence and geopolitical risk. So a preference for gold over silver at these levels and watching for a potential silver unwind on the back of some of this tight market environment in London, more fully unwinding in the coming weeks.
Right. So, yes, silver is down today. The prices are down about 4 percent.
Yes, on the news. So, Othar, moving to the gas, so GTF price is about 25 percent, you know, 25 to 30 percent. Henry Hub is down.
JKM is actually broadly flat. So what is driving such divergences in your view? Whether my understanding is cold everywhere and today New York is freezing cold.
Yes. Hi, Natasha. And thank you for having me.
As it is often in the gas markets, it's primarily related to weather. So we have very cold weather in Europe, marginally warmer, closer to normal elsewhere. So for in U.S. lower 48, weather forecast for December was above 10 year normal for December.
And Henry Hub accordingly reached high of 5.3 dollars per MMBTU in mid December. However, since then, forecasts have changed marginally on the warmer side. And December realized near 30 year normal and January is actually near 10 year normal.
So accordingly, Henry Hub prices moderated from these high levels in December to about 3.2 dollars per MMBTU today. In Asia, it's actually much warmer. December was about 1.6 standard deviation warmer than 10 year normal.
January is marginally colder, but also broadly in line with 10 year normals. But in Europe, we have very cold start to the year. We were withdrawing about one percentage point of storage daily in northwest Europe as January weather is tracking about 1.6 standard deviation colder than 10 year normal.
Coupled with historically low starting storage levels, which we flagged previously, we are now as lowest in storage as we have been at this time of the year at around 42 percent in northwest Europe and about 52 percent in European Union wide. Accordingly, TTL prices have rallied significantly. We are up another 10 percent almost today is another cold.
The revisions came in and we see prices potentially having a further upside, especially in Q1, potentially in Q2. But we find the reminder of the curve to be more or less fairly priced and conducive of Europe to replenish its storages to about 80 percent full towards end of summer. This is supported by relatively favorable Asian weather conditions and the rising LNG supply, which we have discussed at length in the past.
So this LNG supply will be a primary driver for price formation this year. And this near term tightness that we observe at the moment can potentially translate into a wider bullish trend if this new LNG supply, this new anticipated LNG projects are delayed in some form. Thanks, Otar.
I guess maybe turning it back to you, Natasha, the chance of an immediate U.S. response to protests in Iran has reduced, but we're still seeing Washington boosting its military presence in the Middle East. What are your how are you thinking about the implications for oil? Yes, Greg, thank you.
So, yes, oil is finishing the week slightly up. It was a very volatile week. So why Iran is so important?
Yes, it produces about three percent of the global oil. The regime changes in oil producing countries are also very, very important. For example, since 1979, we had eight regime changes in oil producing nations that have typically resulted in price spikes of up to 76 percent with an average increase of about 30 percent and lasting market impacts.
More specifically in Iran, after the Iranian revolution of 1978, oil prices more than doubled, triggering a global economic recession. So in the case of Iranian oil production, actually, it has never recovered and remains about two million barrels per day below pre-revolution levels. But, you know, keeping in mind all of those important events, what is interesting is that despite this precedence, oil is trading today just about two dollar premium, Greg, over its fair value.
Fair value, 62, we're trading at about slightly over 64 today. So what it reflects, yes, why the price is not reacting more. And so our view is that this partly reflects a world which is oversupplied, but at the same time, the prevailing political realities.
And so a couple of points we want clients to keep in mind. Number one is that Iran's political and security architecture remains largely intact, what we're observing today at the moment. So the current protests have yet to develop and to coordinate, you know, they lack coordination, they lack leadership or charismatic leader.
They lack the support from the security forces that would be necessary to drive meaningful regime changes. And despite the scales of the protests, there is still no indication of coordinated elite defections, deflections or fractures within the RGC or the clerical establishment. So number two, just, you know, judging from the news, is that the U.S. and Israel also appear to recognize that forcefully imposing change in Iran could lead to greater instability, a very important factor to keep in mind.
Number three, in the event of a military action, we do believe that Washington would likely favor surgical strikes, deliberately excluding energy infrastructure, shipping rounds. The administration understands very, very well the importance of the region. Twenty percent of oil actually is being produced and transported in the region.
Twenty percent of traded LNGs actually also transit through the area. Similarly, we believe that Iran is likely to retaliate in a measured way and avoid targeting oil or LNG facilities. We assess the risk of the Strait of Hormuz being closed is very low.
We have been talking about that since 2023. So something, you know, to be considered that if Iran indeed decides to shut down the Strait of Hormuz, that would be considered an act of war by the U.S. In the 1980s, President Carter established the Carter Doctrine that states that the United States would guarantee the security and freedom of shipping and naval passage to the Strait.
And so, for example, in the case of the United States, the U.S. 5th Fleet is stationed in Bahrain across the Persian Gulf from Iran and is tasked with protecting commercial shipping in the area. But again, one of the main reasons we believe why oil is not moving higher is that Trump's objective in Iran is not a regime change, but rather a transactional outcome that delivers security concessions and security considerations. So this may include, for example, Iran's agreeing to minimal uranium enrichment, scaling back its missile program, ending support for regional proxies.
And the emphasis is on achieving compliance with U.S. demand rather than on determining who governs Iran. Final point we would like to make is that Iran does not need to rebuild its government from scratch. So it has executive and legislative branches, a popularly elected president.
So actually, it's not unlike the missile that requires a lot of heavy lifting. And finally, if we assume that the regime remains intact, then the oil shocks resulting from such conflicts in the region are typically very short-lived when we see the prices spiking, because there is a lot of confusion, a lot of unknowns factors. But after that, we see the prices declining actually even below the levels when the conflict started.
So we believe that this will be the case in the current situation. Our price forecast for the year remains unchanged. So 58 Brent average for the year, 55 WTI.
So Greg Otar, thank you so much for joining me today. A lot of news, a lot of volatility. The year, you know, clearly the start of the year was very, very busy.
So thank you again for joining us today. Thank you all to listening to the commodities edition at the JP Morgan'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 JP Morgan research reports related to its content for more information, including important disclosures. 2026, JP Morgan Chase & Company, All Rights Reserved. This episode was recorded on January 16th, 2026.