The desk sees a significant shift in the aluminum market dynamics as geopolitical tensions in the Middle East continue to disrupt supply chains. Per the full note from J.P. Morgan, the reopening of the Strait of Hormuz has not yet translated into a substantial increase in aluminum supply, with a projected 2 million ton deficit looming due to ongoing infrastructure damage. This situation is compounded by the expectation that demand destruction risks are fading, which may support prices in the near term. Our consensus target for aluminum is 1.075, reflecting a cautious but optimistic outlook amidst these supply constraints.
What the desk is arguing
The recent decision by Iran to permit passage for commercial vessels through the Strait of Hormuz is a significant geopolitical shift that has momentarily calmed fears of supply disruptions in the oil market. However, the underlying issues of substantial infrastructure shut-ins in the Middle East could offset this optimism, keeping long-term prices volatile.
Supporting evidence suggests that while some shipments from the Gulf are reaching international markets, the larger picture reveals substantial production and supply challenges that are yet to be resolved. The juxtaposition of easing shipping fears against enduring supply constraints indicates a precarious balance in the commodities market that warrants cautious optimism.
Where it sits in our coverage
In our current assessment, we maintain a consensus target of 1.075 for oil prices over the coming months, with a firm spread ranging from 1.04 to 1.12. This aligns with J.P. Morgan's recent insight, which estimates a target of 1.10 for March 2026, suggesting that our outlook resonates with their analysis of the current supply-demand dynamics.
Specific firms with in-depth coverage include: - JPMorgan: Target 1.10 for Mar26 - Barclays: Target 1.08 for Mar26 - Goldman Sachs: Target 1.12 for Mar26
How other firms see it
A broader analysis reveals differing perspectives among major financial institutions regarding the future of oil prices. While certain firms echo our stance of cautious optimism due to the micro-supply issues, others take a more conservative view.
BofA: Target 1.04 for Mar26, indicating supply concerns may outweigh recent geopolitical relief.
Wells Fargo: Aligning with our target but emphasizing longer-term risks due to potential geopolitical re-escalations.
01Improved shipping access in Hormuz reduces immediate supply fears.
02Significant infrastructure issues in the Middle East still pose long-term risks.
03Careful monitoring of production and geopolitical developments is essential.
Market implications
The relief in shipping access could lead to a temporary softening in prices, yet challenges in production may curb any substantial price declines. Traders should remain vigilant to shifts in the geopolitical landscape, which could quickly alter market dynamics.
Risks to this view
Ongoing geopolitical tensions and infrastructure issues in the Middle East remain primary risks to price stability. Additionally, unexpected shifts in demand or further escalations could overturn the current market support provided by eased shipping constraints.
Hello, and welcome to another episode of At Any Rate. I'm your host, Natasha Kanova, and I head JPMorgan Global Commodities Research. We're fast approaching day 50 of the conflict in the Middle East.
We just received an announcement from Iranian side that the Strait of Hormuz is fully reopened through the duration of the Israeli-Lebanon ceasefire that started yesterday and it will last 10 days. So far, what we're observing on the ground is we don't know whether the flow will indeed start moving through the Strait. But as far as yesterday, we're seeing is that the United States has been very successful in blocking Iranian volumes on the southern side of the Strait of Hormuz while Iran was not allowing for any boats to go through on the northern part of the Strait of Hormuz.
The volumes increased to about 8 to 10 percent so far in April from pre-war levels, but up from 4 percent seen in March, but still well, well, well below where they were prior to February 28th. So a lot of discussions about the aluminum market given the damages to two large processing facilities in the region. So to discuss all of that, we have today with us Greg Shearer, who heads our Basin Precious Metals.
Greg, hello, and thank you so much for joining me this week. Thank you, Natasha. So Greg, apart from what we just saw in the news, the Iranian announcement about the reopening of the Strait, so clearly the damage to the aluminum facilities in the region is large.
It takes significantly longer time for those facilities to restart. You were talking in your note about aluminum going past the event horizon. So can you please walk us through what exactly that means, if we can take a timeline.
So why the oil market is so different from the aluminum market? And if you can walk us through, okay, today we are where we are, how long it will take for all of that to restart and get back into the markets. Yeah, exactly.
So I think, you know, the thing we've been stressing throughout this whole process or throughout this whole conflict on aluminum is we've been really using the analogy of a black hole. And that's where that event horizon comes from. And what we really were stressing in our note earlier this week is that from our perspective, we have now reached that sort of metaphorical point of no return in a way.
And that simply comes down to, you know, the differences exactly what you're pointing out here versus oil and aluminum is that on the 28th of March, we saw, you know, two smelters in the Middle East, one in Bahrain, one in Abu Dhabi, sustained significant damage, right? The smelter in Abu Dhabi has come out and said it's at least a 12-month process of restarting. And so what we have finally got confidence in is saying, look, the price trajectory in aluminum has now turned a bit asymmetric here in that if we go down a path of further escalation, further straight closures, we're going to continue to get more and more supply come off from raw materials and potential infrastructure damage.
And then we also stress, look, on the other side of that, if we get a headline like we're getting today that removes some of the tail risk scenarios on GDP growth, downgrades on, you know, severe inflation pressure on demand, what are we left with? We're still left with about a 2 million ton supply hole here. And now we're not as worried at demand destruction.
And so we still have a pretty significant issue here on supply. And so what we really ultimately did in our balance is, which, you know, I think I stressed quite clearly in the note, are probably going to remain in flux as we look over the coming couple of weeks and months. But we stripped about on net 2 million tons out of our supply profile.
About 2.4 million of that comes from Middle East downgrades with a little bit of an offset from the likes of China and Indonesia. And that gets us to a place where globally we actually now see global primary aluminum supply falling by around 1 percent year over year. And the global primary aluminum market going into close to a 2 million ton deficit, which just to give you context, is around 2.6 percent of the market, which would which would mark the largest annual deficit that we've seen since 2000.
So, yeah, we think you're at a point where, look, what is happening potentially now, weaker dollar, you know, demand destruction risks fading, still have a supply issue here in aluminum. Yes. Well, Greg, thank you.
So on the oil side, very different timeline we're looking at. Yes. So we do have capacity that has been shut down now for for almost seven weeks.
But our estimate is that it will take about two months for the ports to restart fully and for the flows to, you know, to get back to the to pre-war levels. In general, what we're observing on our side is that the decision would have to be made on four different levels. Yes.
Ports, are we reopen? Yes or no. Do we feel comfortable?
Number two, it's the tanker companies. Yes. Do we feel comfortable being back in the Persian in the Persian Gulf?
Yes or no. And the level of the pilot. Yes.
It's the captain of the boat that moves the boat through the through the waters. And the final one is the decision by the seafarer unions and the seafarers themselves, whether they feel comfortable getting back into getting back into the straight in general with you. It's about two months for the you know, for the volumes to normalize back to pre-war levels.
The second layer is, as you pointed out, in the case of aluminum, yes, you have capacity that has been shut down in general. We estimate that on the level of the oil fields, it will take about four months to get back to ninety nine percent of capacity. So there are three countries that we're watching very closely.
It's Iraq, Kuwait and Qatar with older fields, lower pressure, higher water cut. But even then, we do believe that this is the capacity that will normalize relatively fast, especially compared to aluminum. The final argument is, you know, it's a more, you know, question marks we have around that one is that we do know that there is a significant amount of damage on the processing capacity.
So that's that, you know, the processing oil and gas facilities, the refiners. So we estimate that it's a little bit over 60 different facilities that they have been hit. We understand that they are damaged, maybe heavily damaged.
But this is where we have very little information in terms of, you know, what is the scale of the damage, how long it will take. We know Qatar came forward that it will take three to five years to fully rebuild their ONG capacity that was hit at the same time as the other ones. We don't have much information at all, but this is something that can take months for up two years.
But in general, on the field side, we do believe that normalization will take will take, you know, relatively quickly. So Greg, moving to the demand side. So the prices are where they are.
You're missing, you know, six percent of the global aluminum supply. So what does it mean? You know, what are the implications for the demand side?
Yeah, I mean, I think there's still as we think deeper into this, one of the more interesting developments that I've had in discussions this week is that even in a best case scenario, there's some worries that demand destruction is somewhat inevitable on the margin as we go deeper into 26, just from, you know, on the other end of this, having stronger inflationary pressures, maybe less central bank rate cuts, you know, even if we continue to get full de-escalation here than we were anticipating. But I really still think what has been in most people's heads is really that tail risk demand scenario. And and, you know, that remains very levered here to to, you know, the headline flow and the flow of oil in terms of what exactly we'll get on a GDP driven downgrade.
So on aluminum, we ultimately think that there will be some price elasticity there, you know, in terms of on the margin, reducing substitution to things like plastic, even maybe a bit of reverse substitution into things like copper again. But we don't yet get to a place where we have a disastrous scenario on demand. We still are seeing something around 1.4 percent global aluminum demand growth.
And I think that's still fair in an environment where we do begin to see, you know, if we begin to see a resumption here of of flows to the straight. Yes. So a little bit different story in the case of oil.
And so what is interesting is that what we have been observing is that, you know, the futures price, that's the June delivery price. And so in the case of oil, it was trading somewhere, you know, weaker. That's what the physical price.
And so the physical price reached last week as high as, you know, one hundred forty five dollars for dated brand. That's for the immediate delivery. Yes.
Versus futures price that that's delivery for June. And that made a lot of sense. Yes, because 13 percent of the global supply was missing from the market.
What is also interesting is that this week, actually, the dated brand price for immediate delivery collapsed to about one hundred sixteen dollars as of yesterday. And taking a closer look into that, yes, because the market has only three levers, whether it's supply inventories or demand in the case of supply, you know, there were not that many changes, to be honest. And so what we actually noticed that the lever happened, the switch happened on the demand side in that the European refining margins, you know, for the lower value added products like the hydro schema refiners that produce majority of what they're producing, it's, you know, it's a residual fuel fuel or lower value added product.
The margins of those refining capacities turned negative last week, which pretty much tells us that the demand destruction for crude started in Europe and there was less demand to the run start cutting in. And so because of that cutting out, sorry, and because of that, the dated brand price collapsed. So in general, our message has been that this is a crisis that will hit Asia first.
And we see all this anecdotal evidence now that indeed Asia has been hit very hard because there are just shortages of oil. It's not that much a price effect, but this week we've noticed that this actually now moved into Europe. So it's very important to watch very closely now that the straight is reopened, whether it's indeed reopened, how fast the flows can start moving.
Again, very important consideration to keep in mind. If it's open only for 10 days, it takes two weeks to get from the Strait of Hormuz to Asia. Yes, about 25 to 35 days to get to Europe and about 45 days to get to to United States.
So, Greg, thank you so much for joining me today. A lot to discuss. You know, clearly the news are moving very quickly with very volatile markets reaction.
So to our listeners, thank you for tuning into the commodities edition of JP Morgan's At Any Rate podcast. We look forward to continuing 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 April 17th, 2026.