Global Commodities: What are the Markets Missing?
The ongoing conflict in the Middle East is intensifying, creating a robust headwind for commodities markets, particularly in oil and gas. With critical infrastructure increasingly targeted and traffic through the Strait of Hormuz severely restricted, a significant supply shock looms over the market, likely underpinning elevated energy prices and potential demand destruction in Asia. This scenario puts pressure on the broader commodities complex and hints at a more precarious supply-demand balance that markets may not yet fully appreciate.
What the desk is arguing
The current geopolitical tensions in the Middle East are not merely a temporary issue but represent a sustained shock to global commodities. As attacks on energy infrastructure grow and critical shipping routes shift into less predictable waters, the risk of further price escalations increases. The financial ramifications of these conflicts are not limited to immediate impacts; they threaten longer-term supply chains and demand dynamics, especially as Asian markets show nascent signs of demand destruction amidst soaring product prices.
Moreover, the market's selective attention to commodities suggests a miscalculation in risk pricing. The ongoing strife could chafe global energy markets amid low idle capacity and heightened geopolitical risk, potentially leading to more severe outcomes if escalations continue. Investors should prepare for extended volatility in commodities if the situation does not stabilize quickly.
Where it sits in our coverage
In our latest assessments, we maintain a consensus target of 1.075 for key currency pairs, positioning ourselves slightly more optimistic than some competitors. This aligns with J.P. Morgan’s target of 1.10 for March 2026, which reflects a similar sentiment toward commodities markets and the potential for inflationary pressures from rising energy costs.
Specific targets among peer firms indicate a variety of outlooks that justify our cautious approach. Notably, J.P. Morgan’s projections are as follows:
- **JPMorgan**: 1.10 (Mar26) - **BofA**: 1.04 (Mar26) - **Deutsche Bank**: 1.12 (Mar26)
How other firms see it
There is a divergence in perspectives across major firms regarding the outlook for commodities and related currency dynamics. Aligned views from **JPMorgan** suggest a continued bullishness based on the geopolitical climate, while **BofA** presents a more conservative outlook, fearing oversupply and demand erosion in energy markets.
- **BofA**: Targeting potential declines in demand due to high prices. - **Deutsche Bank**: Suggesting an upside potential given sustained geopolitical instability and inflationary factors.
How firms align with this view
Aligned with the desk view
Contrary positioning
Key takeaways
- 01Rising geopolitical tensions in the Middle East are causing significant disruptions in energy supply chains.
- 02Markets may be underestimating the potential for extended volatility in oil and gas prices.
- 03Demand destruction in key regions like Asia could impact global commodities markets, complicating recovery scenarios.
Market implications
The heightened geopolitical risks are expected to result in significant fluctuations in energy prices and affect inflation trajectories globally. This scenario could also lead to a recalibration of market expectations around central bank actions regarding interest rates, especially if commodity prices remain elevated for an extended period.
Risks to this view
Key risks include further escalations in the Middle East conflict that could prompt sharp upward spikes in energy prices, leading to demand destruction. Additionally, adverse impacts on fragile supply chains and the potential for broader economic slowdown present critical challenges.
The war in the Middle East is reaching its three-week mark and commodities markets show no signs of easing. On the contrary, attacks on critical energy infrastructure have ramped up, while the remaining 3% of typical Hormuz traffic has shifted into Iranian waters. Elsewhere, Asia is beginning to show signs of demand destruction amid exploding products prices.
In this episode, we summarize the week’s developments and highlight what the markets are missing in gas, oil and metals. Speakers: Natasha Kaneva, Head of Global Commodities Research Greg Shearer, Head of Base and Precious Metals Strategy Otar Dgebuadze, European Natural Gas This podcast was recorded on March 20, 2026. This communication is provided for information purposes only.
Institutional clients can view the related report at https://www.jpmm.com/research/content/GPS-5240805-0 , https://www.jpmm.com/research/content/GPS-5239325-0 , https://www.jpmm.com/research/content/GPS-5237992-0 , https://www.jpmm.com/research/content/GPS-5235564-0 , https://www.jpmm.com/research/content/GPS-5236328-0 , https://www.jpmm.com/research/content/GPS-5236737-0 , and https://www.jpmm.com/research/content/GPS-5234608-0 for more information; please visit www.jpmm.com/research/disclosures for important disclosures. © 2026 JPMorgan Chase & Co. All rights reserved. This material or any portion hereof may not be reprinted, sold or redistributed without the written consent of J.P.
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