The escalating conflict involving the United States, Israel and Iran is already disrupting global commodity markets, tightening supply across energy, fertilizers, chemicals and several metals while raising the risk of prolonged price volatility.
Analysts at BMO Capital Markets say the region’s central role in global supply chains has triggered sharp price reactions in commodities tied to Middle Eastern production. The most immediate impacts have been seen in oil and fertilizer markets, where supply is highly concentrated.
Oil markets have experienced the most significant disruption. According to BMO oil and gas analyst Randy Ollenberger, the conflict represents one of the largest shocks to oil markets in decades. Prices briefly surged toward $120 per barrel before stabilizing near $90, but analysts warn the market may still be underestimating potential supply risks.
Shipping through the Strait of Hormuz has been severely disrupted, with tanker traffic dropping dramatically from the usual 80 vessels per day to only a small number. Storage constraints and refinery outages are adding further pressure to global petroleum supply chains.
Analysts warn that prolonged hostilities could tighten global oil inventories even further and drive prices higher if regional disruptions expand.
Chemical markets are also tightening as Middle Eastern production faces constraints. The region accounts for roughly 15% of global polyethylene production, meaning disruptions could push global industry utilization rates above 90%.
Producers in the United States and Europe have already begun announcing price increases as supply conditions shift from surplus to tighter markets. Higher feedstock costs are also affecting related sectors, including titanium dioxide production.
Fertilizer markets are experiencing similar pressures. Nitrogen fertilizer prices have risen about 30% since the conflict began, reflecting the Middle East’s major role in global exports. Countries in the region account for nearly half of global urea exports, while Russia and Middle Eastern producers dominate nitrogen supply.
Higher natural gas prices in Europe are also widening the cost advantage for North American fertilizer producers. Companies such as CF Industries and Nutrien could benefit from the shifting market dynamics.
Metals markets have responded unevenly depending on supply exposure and macroeconomic factors. Aluminum prices have strengthened due to the Middle East’s role in global production, which accounts for roughly 9% of supply. Analysts estimate up to 5 million tonnes of regional output may already face disruption.
Iron ore and thermal coal have also seen price support due to higher energy costs and supply uncertainties. Meanwhile, metals such as copper and nickel have remained under pressure as broader market concerns about inflation and a stronger U.S. dollar dampen investor sentiment.
Analysts suggest the conflict could reinforce long-term trends supporting electrification and strategic resource security. Rising energy security concerns may accelerate efforts to diversify supply chains and build strategic reserves of key industrial metals.
Battery metals face a more complex outlook. Lithium production is less directly exposed to higher sulfur costs, but prolonged disruptions could affect refining capacity in China, the world’s largest lithium processor. Nickel production may face greater risk because sulfur-intensive extraction methods, particularly in Indonesia, depend heavily on sulfuric acid.
Beyond battery metals, the conflict could also increase demand for minerals linked to defence manufacturing. Modern warfare relies heavily on metals used in drones, missiles and advanced weapon systems, including tungsten, rare earth elements and antimony.
With the duration and potential escalation of the conflict still uncertain, commodity markets remain highly sensitive to developments in the region. Even if shipping routes normalize quickly, analysts say the disruption has already altered supply dynamics across several key sectors of the global resources industry.
