Oil Jumps 25%, Shaking Commodity Markets!
Oil prices surged around 25% on Monday, March 9, to their highest level since mid-2022, fueling the escalation of the Iran war, which is squeezing global energy supplies. Brent is on track for its biggest daily gain, while the market assesses the lack of clear signs of de-escalation in the Middle East, leading to a return of the supply risk premium.
The oil rally has prompted supply cuts by several Middle Eastern producers and concerns about prolonged disruptions to shipping through the Strait of Hormuz. Brent briefly touched around US$119.50 per barrel and WTI US$119.48 per barrel. Several analysts have highlighted signs of worsening conditions, including the start of production shutdowns due to limited storage in Iraq, Kuwait, and the United Arab Emirates, including the start of production cuts.
These supply pressures and logistical risks are spreading to agricultural commodities, particularly those related to biofuels. Vegetable oil prices rose sharply, with Malaysian palm oil rising 9% and soybean oil in Chicago reaching its highest level since late 2022. Wheat rose to its highest level since June 2024, while corn hit a 10-month high, following the oil sell-off.
Conversely, gold fell more than 2% as a combination of a stronger dollar and inflation concerns dampened expectations of an imminent interest rate cut. The US dollar held near a three-month high reached last week, making gold more expensive for holders of other currencies. Under these conditions, the safe-haven appeal of gold was outweighed by the effects of a stronger dollar and expectations of higher interest rates for longer.
Among industrial metals, aluminum surged amid concerns about supply disruptions. The three-month aluminum contract on the London Metal Exchange rose to its highest level since March 2022, at around US$3,544 per tonne. Two regional producers, Qatalum and Bahrain Aluminum, have reportedly declared force majeure on deliveries due to escalating tensions in the Middle East.
Going forward, the market will assess whether shipping disruptions and production shutdowns become widespread, as this will determine how long the pressure on energy and related commodities persists. Key variables for market participants include the status of the Strait of Hormuz, actions taken by Middle Eastern producers regarding output and storage, the direction of the US dollar and US interest rate expectations, and the potential for further disruptions to metal and food supply chains. (asd)
Source: Newsmaker.id
