Theme of the Day: The great commodities disruption

Trump’s attack on Iran has served as a reminder of how interconnected the global economy remains. The World Bank’s Commodity Markets Outlook, published on 28 Apr 2026, said that 50% of the world’s seaborne trade in sulphur passes through the Strait of Hormuz. So does 34% of trade in crude oil, 29%of liquefied petroleum gas, 19% of liquefied natural gas, 19% of refined oil products, 13% of chemicals, including fertilisers, and nearly 10% of aluminium. This is a chokepoint of the world economy. As the World Bank notes, the initial impact of the closure of the strait was a global loss of 10.1mn barrels a day of oil in Mar. This was much larger than the impact of the Iranian revolution in 1979, the Arab oil embargo in 1973, Saddam Hussein’s invasion of Kuwait in 1990, or the Iran-Iraq war in the 1980s. It is the direct result of the closure, which reduced the number of tankers passing through the Strait of Hormuz from some 60 a day to close to zero after 5 Mar. The inevitable outcome has been very large jumps in price: the price of oil per barrel jumped by $46 in Mar, far more than any other monthly rise in the 2000s. Between the beginning of the war and 20 Apr, the price of Singapore jet fuel doubled, that of urea rose by 85%, of Asian LNG futures by 46%, and of Brent crude by 32%. The first question is how far the oil now blocked up in the Gulf can be replaced from other sources. On this the bank provides an intriguing and important analysis. Of the gross loss of 20mn barrels a day, 1.5mn can be made up by other Opec producers, 5.5mn by use of alternative pipelines, 3.3mn from inventories, 3.9mn from sanctioned oil in transit, 0.5mn from additional supply from high-income countries, and 0.5mn from biofuels (more difficult now, given the fertiliser shortage). This leaves a shortfall of 4.6mn barrels a day — a little over 4% of global consumption. Yet the drawdown of inventories cannot last for ever. When they run out, the shortfall would rise towards 8% of global consumption. The second and crucial question is how long the near-total closure of the strait will last and how long it will then take to get things back to normal. Not surprisingly, the Iranian elite is split over what concessions it might make, not least on its nuclear programme. If one thing must be obvious to them it is that having a nuclear bomb would make them safer. The bank’s forecasts of commodity prices assume that the most acute phase of the supply disruptions ends in May. Thereafter, shipping volumes through the strait are assumed to recover haltingly, to stabilise around prewar levels by Q426. On those assumptions, the bank’s energy price index is forecast to rise by 24% this year. Prices of fertilisers are forecast to rise 31%, with urea up 60%. Overall commodity prices are forecast to rise 16% in 2026, driven by soaring energy and fertilizer prices and record-high prices for several key metals. Risks are definitely on the upside: the bank’s forecast for the average oil price this year is $86/bbl, more or less what the futures market suggests. But with more prolonged disruption and greater damage to facilities, it might reach an average of $115 (or more), with a legacy well into next year. Prices for base metals, including aluminium, copper, and tin, are also expected to reach all-time highs, reflecting strong demand related to industries including data centres, electric vehicles, and renewable energy. The war has since exacerbated supply challenges for base metals, either by impeding production and shipments directly, such as for aluminium, or by curtailing the supply of essential production inputs such as sulfuric acid. Precious metals continue to break price and volatility records, with average prices forecast to increase 42% in 2026, as geopolitical uncertainty fuels demand for safe-haven assets.