We have just experienced a very bullish week in commodity exchanges, and the beginning of the week was particularly extreme! Literally, the vast majority of futures prices for various exchange commodities exploded, especially oil prices. However, by the end of the same day, prices significantly corrected downwards. In the end, oil remained above the $100/bbl level, and we are facing another intense week.
Besides the war, which is topic number one, two, and three, the American FED will also be in focus this Wednesday. Powell will address the elephant in the room, namely the rise in crude oil prices by $50, which Goldman Sachs estimates could add approximately 1 to 1.5 percentage points to U.S. inflation this summer. The FED wants 2% inflation, and such oil movements direct it towards 4%.
Therefore, Wednesday will be a very tense day, and Powell’s speech will certainly impact stock prices, the U.S. dollar (the dollar is strengthening, and the current EUR/USD rate is below 1.15), and commodity markets. Trade negotiations between the U.S. and China that began in Paris will also be in focus.
Analysts estimate that if the war lasts a few weeks, there will be no major consequences for the global economy. On the other hand, a prolonged conflict with Iran and in the Middle East could cause significant stagflationary shocks for the global and European economy, with higher energy prices, higher overall inflation, and tighter financing conditions. The U.S. believes it can tolerate higher oil prices for about three to four weeks before they become a serious political problem.
Trump says he will not change his military strategy due to short-term price fluctuations and that it will take a few weeks of consistent data before policy adjustments. The countries most affected by the Hormuz blockade are the Arab countries of the Persian Gulf regarding exports, and India, China, Japan, and Pakistan regarding imports.
Who actually drives the world, and who are the leading global exporters? In a world shaped by supply chains, industrial capacities, and geopolitical alignment, export strength remains one of the clearest indicators of economic impact. According to WTO data, global exports reached $23.8 trillion, with a strong concentration among a limited number of economies that drive most international trade flows.
China leads by a wide margin with exports of $3.38 trillion, supported by unparalleled production capacity and global logistics integration. The U.S. follows with $2.02 trillion, driven by high-value goods, energy, and advanced technologies. Germany remains the European export engine with $1.69 trillion, reflecting its industrial depth and leadership in engineering.
The Netherlands ($935 billion) and Japan ($717 billion) punch above their weight thanks to strategic positioning on global trade routes and advanced manufacturing. Italy ($677 billion) and France ($648 billion) continue to anchor a diverse European export ecosystem, from machinery and chemicals to luxury goods and the aerospace industry. South Korea ($632 billion), Mexico ($593 billion), and Canada ($569 billion) illustrate the growing importance of regionalized trade blocs and nearshoring strategies.
Meanwhile, emerging players like Vietnam, UAE, Saudi Arabia, and Brazil are gaining significance, leveraging commodities, energy, and competitive manufacturing to expand their global footprint.
Oil Above $100 Shakes Commodity Exchanges
Oil prices surged strongly last week for the second consecutive week, as the crisis in the Middle East has hindered oil exports through the Hormuz Strait, causing prices to jump more than 40% in two weeks since the U.S. and Israel attacked Iran. Thus, Brent oil is near the $105/bbl level, while WTI oil is around the $100/bbl level.
Although Trump declared victory, Iran continues to attack neighboring countries and does not allow oil exports through the Hormuz Strait, through which about 20 million barrels or about 20% of global oil consumption pass daily. The International Energy Agency (IEA) stated that this is the largest supply disruption in history and decided that its members will coordinate to release 400 million barrels of oil from strategic reserves into the market.
This volume is more than double the 182 million barrels released in 2022 after the Russian invasion of Ukraine, but analysts say it is still insufficient to compensate for supply losses resulting from the prolonged conflict in the Middle East. Thanks to this, oil prices have somewhat stabilized, but they still remain at elevated levels. The war in Iran is currently the largest oil shock in history in terms of millions of barrels produced daily.
This is more than five times the OPEC embargo after the Yom Kippur War and Saddam Hussein’s invasion of Kuwait, both of which caused severe global recessions. In a move that could reshape the global geopolitical balance, Trump announced a temporary suspension of sanctions on certain Russian oil shipments.
This decision is not only economic but is also linked to a complex diplomatic maneuver; lifting restrictions could be offered to Moscow in exchange for an active mediating role with Iran in resolving the crisis in the Hormuz Strait. Primarily due to the crisis in the Middle East, oil prices have risen more than 70% since the beginning of the year, after falling about 20% last year.
Futures prices for European natural gas TTF have risen to €52/MWh, and markets remain focused on prolonged supply disruptions amid escalating conflict in the Middle East. Iran has launched retaliation against Israel and several Arab states after the U.S. targeted military installations on Kharg Island, a key hub through which most of the country’s oil exports occur, raising concerns about continued unrest and further delays in reopening the Hormuz Strait, a critical global transit point.
Energy giants Shell and TotalEnergies have formally notified their customers of force majeure for liquefied natural gas (LNG) supplies from Qatar. Meanwhile, Trump has called on others to help secure passage, while reports indicate that the administration is expected to announce this week that several countries have agreed to form a coalition to escort ships through the strait. At the same time, EU foreign ministers will discuss expanding a small naval mission in the Middle East.
Energy Shock Spills Over to Food, Fertilizers, and Agricultural Commodities
Besides crude oil, the agricultural world will monitor weather developments and drought in Brazil, improved rains in Argentina, recent snowfall in the U.S., export demand, and hedge fund positioning ahead of the USDA report on stocks and potential planting in the report expected on the last day of the month. Otherwise, funds know that when crude oil is above $100/bbl, it affects the prices of agricultural commodity futures on the CBOT, so they buy contracts and build long positions.
In the last 20 years, there have been 57 trading sessions when crude oil closed just below $100/bbl. On those days, corn averaged $6/bu (and today it is $4.67/bu, which is 22% lower); wheat averaged $8.07/bu (and today it is $6.14/bu, which is 24% lower), while soybeans averaged $13.75/bu (and today it is below $12/bu). Funds know this math. Therefore, it is not surprising that they have increased their long position in corn to 29.5 million tons, in wheat to nearly one million tons, and in soybeans to 31.5 million tons. The total long position of funds is over 76 million tons, of which over 90% consists of soybean meal, soybeans, and corn!
The longer the conflict in the Middle East lasts, the more likely people around the world will pay more for food. The main reason for this is the rise in prices of nitrogen-based artificial fertilizers. The Persian Gulf is a dominant source of fertilizers. Although the region is best known as a massive source of oil and natural gas, its energy abundance has spurred the development of factories that produce raw materials for many types of fertilizers, especially those that produce nitrogen. Nitrogen fertilizers are essentially natural gas repurposed as plant nutrients. They feed crops that produce about half of the world’s food supply. The region bordering the Hormuz Strait accounts for about 25-30% of global urea exports.
Futures prices for copper are hovering around $12,700/t, maintaining losses from the past two weeks as a strong dollar and rising yields on U.S. government bonds continue to weigh on the metal complex. Traders have also been monitoring the escalation of tensions in the Middle East after the U.S. attacked military targets at Iran’s main oil export hub, Kharg Island, increasing supply risks and driving up oil prices.
Meanwhile, concerns about slowing demand from China, the world’s largest copper consumer, have increased pressure, and slowing construction activity is burdening metal consumption. Higher energy costs and rising inflationary pressures have also diminished expectations that the U.S. FED and other major central banks will cut interest rates, creating additional unfavorable conditions for non-yielding metals.
