Unfortunately, the madness continues. Currently, everything, but absolutely everything, revolves around the Middle East. This is the first, second, and last news in the world; everything else is currently less important or even irrelevant. If global supply chains were previously limited, they are now disrupted. Since the Middle East is synonymous with oil and energy in general, it is expected that everything now revolves around oil and energy prices.
As speculated, oil has surged to over $100/bbl! Oil prices have now risen by 92 percent this year, effectively doubling compared to the end of 2025. The last time crude oil traded above $100/bbl was in 2022, at a time when inflation was the topic of all topics. That connection between energy prices and inflation is now frightening markets again as geopolitical risks in the Middle East escalate. Interestingly, the dollar has once again jumped as the first refuge for investors, ahead of gold and silver. The dollar/euro is approaching the level of 1.15. And one more thing, who still asks about Ukraine?
Oil and gas break multi-year records
Futures prices for crude oil rose by more than 35 percent last week. Now, on both reference exchanges, WTI and Brent, prices are above $100/bbl. Due to disruptions in deliveries through the Hormuz Strait, all countries in the region had to significantly reduce production as their storage capacities are nearly full, and exports are significantly hampered. The price spike at the beginning of this week is particularly pronounced, marking the largest single-day increase since April 2020, reaching the highest price level on Brent since June 2022.
Kuwait has begun to reduce production at its oil fields and refineries, while the UAE has stated that they are managing offshore production to meet storage needs, while onshore operations continue normally. In Iraq, production from three main southern oil fields has fallen by 70 percent to 1.3 million barrels per day from 4.3 million barrels per day before the conflict. This followed a reduction in LNG production by Qatar last week, further decreasing global supply.
If the situation continues to develop as it has, it is only a matter of days before we see and reach the level of $150/bbl. In this entire situation, one of the big losers is also China, along with the EU, which has been buying large quantities of oil from Iran and other Gulf countries (about 45 percent of oil). On the other hand, a major winner in all of this is Russia. Not only has the price of oil surged, but its negotiating position with respect to China has changed, allowing it to sell oil at a much lower discount than before.
Futures prices for European natural gas have surged to levels above €60/MWh, the highest in three years, continuing a 67 percent increase from last week due to heightened supply concerns. The Qatari LNG plant Ras Laffan, the largest in the world, remains largely untouched after unprecedented shutdowns last week, although the country’s energy minister warned that restarting operations and deliveries could take weeks or even months.
The shutdown of the main LNG exporter could erase a large part of the global oversupply expected this year. Russia has also mentioned the possibility of halting gas exports to Europe. Given that storage capacity in the EU is below 30 percent, the region is exiting winter with depleted reserves. Meanwhile, G7 finance ministers are reportedly set to discuss a coordinated oil release with the International Energy Agency.
The gas situation in the EU is indeed dire, and the EU is the biggest loser in the current situation. There are at least 30 days left until the end of the heating season, possibly more. Meanwhile, two key suppliers have disappeared from the global LNG market, Qatar and Oman. Their total annual production capacity is 80 million tons, or more than 15 percent of global liquefaction. Gas prices in Europe have accelerated their rise after QatarEnergy halted exports.
Qatari export terminals are very close to Iran; a stray missile or drone is enough to blow them up, so their stance is understandable. However, the actions of Europe are less understandable, as it recently approved sanctions against Novatek’s LNG projects. This move has excluded it from seven percent of its future gas imports (starting from 2027). And it is no longer worth discussing Russian gas via pipelines.
Europe the biggest loser, Russia and the USA strategic winners
In reality, Europe has been in free fall towards a serious gas crisis since last autumn. However, with the outbreak of conflict in the Middle East, this crisis is developing into an extremely frightening scenario. Even the “Chinese friends,” despite their best intentions, will not be able to help much by reselling their LNG as the quantity will not be sufficient to cover the deficit. However, at record prices like these, American LNG terminals can greatly benefit, this time squeezing out Qatari gas and further strengthening Europe’s energy dependence on the USA.
In addition to Iran and crude oil, agri traders will be monitoring the USDA WASDE report expected this week and the weather in South America and their impact on the planting of safrinha corn and soybean harvest. We also see price increases in agri markets. Futures prices for all commodities rose last week, and they opened the new week in the green. At the same time, funds bought back and closed their short positions, and are now long on both grains and oilseeds.
Regarding grains, this situation, if it continues, hints at a significant increase in the medium term. Meanwhile, the current crop will not perform well, as consumption is well covered, and supply is abundant. Nevertheless, in the short term, increased supply from the Black Sea could burden the Mediterranean, given the blockade or reduced traffic through Suez. For example, all Russian exports planned for Iran are now blocked. That goods must find alternative markets.
The war in the Middle East burdens soybeans, and there are two critical factors. The price of oil and China’s intentions, namely whether China will buy those eight million tons of soybeans from the USA by the beginning of summer? If the war in Iran calms down, and China does not buy that soy from the USA, with the existing significant premium over South America, the price of soy must fall. In all of this, it should also be added that Argentina has decided to reduce export duties on soy, which will further burden prices.
The Persian Gulf accounts for a significant portion of global urea and sulfur production. This explains the rise in global prices of these strategic raw materials and concerns about global fertilizer stocks. The high price of fertilizers, in turn, heavily burdens all agricultural products. The global fertilizer market was already under pressure before the escalation of the conflict in the Middle East. China has restricted exports to meet domestic needs, while in the EU, production has collapsed due to the cessation of Russian gas supplies.
War spills over into the crisis of food, fertilizers, and industrial metals
With the outbreak of conflict, the world has lost three largest Asian fertilizer producers: Qatar, Iran, and Saudi Arabia. Three Indian plants were forced to reduce urea production due to a drastic drop in liquefied natural gas (LNG) supplies from Qatar. The world’s most populous nations, India and China, along with major agricultural exporters like Australia and Indonesia, are now facing serious disruptions in the supply of essential fertilizers. Let us recall that, according to UN Secretary-General António Guterres, there is no solution to the threat of imminent global hunger without restoring food and fertilizer supplies from Russia.
Futures prices for copper have fallen to levels below $12,700/t, reaching multi-week lows amid fears that the conflict in the Middle East could last longer than expected and lead to lasting economic disruptions. Copper prices are also under pressure due to the rising dollar, as investors have turned to the currency as a safe haven for value preservation and revised expectations about the Fed’s policy due to renewed inflation risks. In China, the main consumer, annual inflation surged to a three-year high in February, partly driven by consumption for the Lunar New Year holidays.
Where exactly does aluminum (and its raw material, alumina) fit into the conflict in the Middle East? Among other powers like China, Bahrain and the UAE rank high as the third and fourth largest importers of alumina in the past year. Since aluminum smelting is very energy-intensive, access to the Persian Gulf’s abundant and relatively cheap natural gas is a key factor for the growth and competitiveness of its aluminum industry. Most of the aluminum produced in the Persian Gulf is exported, with key markets including Asia, Europe, and North America. Therefore, it is expected that the global market will face supply disruptions and price volatility. Currently, the futures price is hovering around $3,900/t.
