What's takeaway 1 on Global Commodities?

Rising geopolitical tensions in the Middle East are causing significant disruptions in energy supply chains.

What's takeaway 2 on Global Commodities?

Markets may be underestimating the potential for extended volatility in oil and gas prices.

What are the market implications for Global Commodities?

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.

What are the risks to this view on Global Commodities?

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.

Global Commodities: What are the Markets Missing?

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.

Hello, and welcome to another episode of At Any Rate. I'm your host, Natasha Kanova, and I head JPMorgan Global Commodities Research. It is day 21 of the conflict in the Middle East, and market conditions in commodities markets have not improved.

Traffic through the Strait of Hormuz remains stalled, and Iran is controlling the passage of the few vessels that do make it through. To add fuel to the fire, attacks on energy infrastructure have ramped up across the biggest regional gas fields, refiners, and ports, putting strain on both producers in the Middle East and importers outside of the region. The situation is evolving fast and making it hard to discern what matters most for the markets.

To help us cut through the noise, we are joined today by Greg Scheer, who heads our Precious and Base Metals Research, and Otar Deboadze, who leads European Natural Gas. Greg, Otar, hello, and thank you so much for joining me today. I'm sure that it has been another busy week for you.

As we have done for the duration of this conflict, let's first summarize what happened this week. So, Otar, if you don't mind, let's start with gas. So gas has been central in infrastructure damages this week, from hits to Iran, the UAE gas fields, to Qatar's LNG facilities.

Could you please run us through what you're seeing in your world at the moment? Hi, Natasha, and thank you for having me. Yes, certainly, we saw a step up in escalation, not only for gas markets, but I think, generally, in the conflict, as the energy infrastructure became a direct target for both sides of the conflict.

It started with the Israel attack on the Iranian gas field, South Pars, which is a majority of Iranian gas production. Most of it is consumed domestically, part of it is exported to Turkey, and potentially, there may be a spillover to Turkish gas market, and by extension, over to the LNG market. But Turkey also has spare capacity for Russian pipeline gas.

So the impact of that is relatively limited, as it is the impact of the attacks on the UAE gas infrastructure, which mainly is for domestic market and some specific downstream products. The biggest impact is, obviously, the attack on Qatari LNG infrastructure. As a reminder, Qatar is about 18% of global LNG supply, and these two trains that have been damaged is about 17% of Qatar's total capacity.

This certainly was not expected, and this marks a significant escalation. We estimate that after these attacks, Qatar could potentially ramp up its production to about 80% after the hostilities are over, and about a month after that to restart operations, which in absolute terms results to about 36 BCM of lost Qatari volumes throughout the injection season, if conflict ends in one month. And then 7 BCM after for every one more month.

For a comparison, this is about half of what Qatar exported during the same period last year. Thank you, Atar. So staying at the energy side of the balance, oil repriced from about $100 last week to around $110 this week as Iran and Israel traded fresh attacks on energy infrastructure, including the Fujai report in the UAE and an oil refinery in Kuwait.

To calm the markets, the US outlined a new package of measures to manage the supply oil crisis while leading European nations. And Japan and Canada offered to join efforts to secure safe passage of oil tankers through the Strait of Hormuz. At the same time, very high levels of prices like Dubai and Oman for Asia are creating a demand disruption.

Diesel has become the region's immediate choke point, slowing travel and freight and prompting governments to deploy demand management measures. For example, shorter work weeks were announced, remote work, driving restrictions and direct intervention to stabilize prices. And the strain is most visible in aviation, where jet fuel prices are right now near $200 per barrel and pushed carriers to add surcharges and cut on economic routes with some airlines already reducing services.

At the same time, industrial demand is being curtailed by feedstock shortages rather than choice as constrained NAPTA and LPG feedstock from the Persian Gulf forced rapid shutdowns and rate cuts in Asia and European steam crackers. So Greg, switching to metals for updates. So across the base metals move lower this week, but it does appear that the action, especially on the bear side, is mostly visible in the precious markets now.

So gold is now trading at about $4,500, you know, down from, you know, $5,300, yes, at the start of the conflict. Please walk us through what you see in your space. Yeah, it's a sea of red out there as we've begun to see market complacency, I think begin to crack here.

Maybe just first quickly on the base metal side, what it is, is beginning to more materially price and demand destruction. So we've seen, you know, for instance, copper rolling over. It's down between 6% to 7%.

The most surprising one is aluminum being carried with it, where we haven't really got any incremental new supply headlines after Alba announced about a 20% closure of the world's largest melting complex over last weekend. But like you mentioned, the most eye catching is in gold and the rest of precious metals. Gold at the moment down around 9% this week as we're recording this.

Now, what is driving this, right? Because it's something that we flagged last week in that, yes, this is an extremely brutal flush. But from our perspective, what it's telling us is more about gold getting caught up in a contagion risk of a sell everything trade, right?

So what's faced gold this week is a combination and almost a storm of multiple factors. So we've seen technical factors come in. We broke the 50 day moving average, and that's been quite important throughout this whole rally.

We've seen momentum unwind and also on top of that, just this de-risking of portfolios that has impacted across the broader markets. On top of that, the Fed repricing has moved from, you know, pre this conflict to cuts to now 50% chance of a hike by October. And so that's been a material swing responding to the higher energy prices.

And then finally, I think there's a bit of concern in the market that we could, you know, the combination of economic energy FX stress could prompt a sea change in central bank gold flows and gold buying behavior. And so that's weighing on the prices as well. So in general, a market de-risking flush that has been quite brutal and definitely leaves us in an interesting, very technically driven market at the moment.

Thank you, Greg. So Otar, as long as we're focusing right now on prices and Greg walked us through what we're observing in the metal space, we had a move in the European natural gas prices and also the Asian gas prices. Are you surprised that the move has been pretty contained?

So the move was actually quite big at the open. We opened a near 74 euros yesterday in Europe, and then it normalized slowly to about 60 euro per megawatt hour. So we repriced the market from about 50 euro up until yesterday to about 60 euro now.

And no, I'm not surprised. This is the price level that we estimated between 60 and 70 euro for market to stabilize if Qatari volumes are out for a significant amount of time in summer. I would expect prices potentially can go higher, maybe closer to 70 if there are more disruptions and more delays in Qatar.

However, these prices in my mind assume that we will have Qatari volumes back for winter. I think if the probabilities of winter prices, sorry, Qatari being out for winter will impact the prices both for rest of the injection season and then obviously for the winter. And I would make a quick comment also on the long term prices.

TTF 2030 contract made one euro move in last two days. And up until from the conflict to yesterday, it was also up by just a euro. So the move over last two days is equivalent to what we saw throughout rest of the conflict.

And I think that's an important observation, and that's what we've been highlighting from the beginning that these events fundamentally can fundamentally reshape the global LNG market and this oversupplied narrative that has been persistent over the last couple of years. And that's what we are observing over the last couple of days. Thank you, Tar.

So in the case of oil, we're receiving very similar question is that, you know, this is one of the biggest exogenous supply shocks in the recent history. Yet, if you take a look at the, you know, the benchmark prices like WTI and Brent, they have been pretty contained. And so at face value, the question we're receiving is, is this a market complacency?

But you know, what we're pointing out is that both Dubai, I'm sorry, both Brent and WTI are the benchmarks that serve the Atlantic Basin, while the current shock is concentrated in the Middle East. And because of that, we tell our clients that they should be taking a closer look at the benchmarks like Dubai and Oman that are already trading into the $160 per barrel, because those are the ones that are showing exactly where the tightness in the markets is. And this is Asia.

So hence, our view is that as long as the Strait of Hormuz is not reopened, this divergence between the Atlantic Basin benchmarks like Brent and WTI will ultimately have to reprice higher as the inventories in the Atlantic Basin are drawn down and the global market is forced to clear at a materially tighter supply level. So Greg, and to finish the conversation with you, so there is MS pricing in the forward curve. It does appear for oil and for gas as well.

Do you see the same, you know, impact more medium term to longer term on metals prices from the current conflict in the Middle East? Yes, so we still ultimately think that aluminum is facing a pressing, imminent supply disruption that is going to be larger at scale at first than what we think is likely on the demand destruction side. And so we still think that you're here.

It's our most bullish long conviction across the base metal side. That's what I'd say the one is most mispriced. The other metals have supply disruptions down the road, but have bigger buffers.

And so to me, price more in on a first order impact of demand destruction. So this is like copper, where we still think that there is, based on historical precedent, further downside before capitulation has come through. The final point I would just make is the question I'm getting is, is this changing your medium term bullishness on gold?

And it is not right. What we're seeing from my perspective is a flush, is a de-risk. Yes, it's brutal.

Yes, it's been quite extreme. But let's think this through. If we're right or not right, but if we go through this process and continue to see disrupted and higher for longer energy flows, in our view, there comes a flip point.

And this is our economists have been explaining this, where you go from worrying about the inflation impacts to much more materially about the growth impacts. And that comes with a devish reaction function switch from the Fed. And so quickly, we think that this becomes a dip to buy into another leg of a very strong leg of this gold rally.

As we get into that kind of end cycle recessionary potential dynamics, we should ultimately prove very bullish for gold. Yes, very good point, Greg. So Greg O'Tour, thank you so much for joining me today on this busy week.

Thank you to our listeners for tuning into the Commodities Edition at the J.P. Morgan Science at any rate podcast. We look forward to continue the conversation next week.

This communication is provided for information purposes only. Please refer to J.P. Morgan research reports related to its content for more information, including important disclosures. 2026 J.P.

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