Global commodity markets remain dominated by the Iran conflict's impact on energy supplies and emerging optimism around US-China trade détente. Brent crude reached $138/barrel on April 7 as the Strait of Hormuz closure tightened supplies, with global inventories expected to fall 8.5M b/d in Q2 2026. Agricultural markets are seeing renewed momentum from Beijing's commitments, while metals face supply constraints from Middle East disruptions.
TL;DR
- Brent crude climbed above $105/bbl amid Iran nuclear negotiations complicating Strait supply
- Middle East disruptions shut in 10.5M b/d production in April
- Aluminum hit $3,676/ton, highest since March 2022, up 45% yearly
- China pledged $17B annual US agricultural purchases through 2028 after Beijing talks
- Natural gas fell to $2.92/MMBtu on maintenance at LNG facilities
Energy Markets: Geopolitical Premium Persists
Crude Oil
Brent crude futures climbed above $105 per barrel Friday after Iran's Supreme Leader ordered enriched uranium to remain in Iran, complicating negotiations, though uncertainty persists over Strait of Hormuz reopening. WTI crude is trading at $96.60 per barrel.
Brent futures remain down more than 6% for the week as markets price in possibilities of agreement between opposing parties. Oil prices remain nearly 50% above pre-war levels, with nearly 10M barrels withdrawn from US Strategic Petroleum Reserve last week, marking the largest release on record.
The supply situation remains critical. Iraq, Saudi Arabia, Kuwait, UAE, Qatar and Bahrain collectively shut in 10.5M b/d crude production in April, with the Strait effectively closed until late May and shipments unlikely to reach pre-conflict levels until late 2026.
OPEC+ agreed to a modest 188,000 b/d production increase for June as the US-Israel war on Iran disrupts Gulf supplies, with seven participating countries implementing the adjustment.
Natural Gas
Natural gas fell to $2.92/MMBtu on May 22, down 3.21% from the previous day. Flows to major US LNG export facilities declined from a monthly record of 18.8 bcfd in April to around 17.0 bcfd in May due to seasonal maintenance at Golden Pass LNG and Freeport LNG.
The EIA forecasts Henry Hub will average $2.83/MMBtu in Q2 2026 and $3.50/MMBtu for full-year 2026. L48 production averaged 117.2 Bcf/d in Q1 2026, expected to average 118.9 Bcf/d in 2026 and 124.0 Bcf/d in 2027.
Geopolitical tensions surrounding the Strait of Hormuz continue to support global natural gas prices and reinforce concerns over supply security. Global LNG prices remain elevated as a result of reduced flows through the Strait, with wide spreads between US domestic and international markets.
Metals: Supply Disruptions Drive Premiums
Aluminum
Aluminum increased to $3,676/ton, the highest since March 2022, gaining 2.2% over four weeks and 45.16% over 12 months. Futures rose above $3,670/ton amid prolonged Middle East supply disruptions, with pre-war Gulf supply responsible for 9% of global supply and nearly 25% of non-Chinese supply.
Citigroup reported the Iran conflict removed roughly 3M tons of aluminum supply from the market, with spare capacity near zero and inventories at a 55-year low, noting prices could reach $4,000/ton within three months if demand doesn't decline significantly.
Copper
Copper prices declined Tuesday, driven by weaker Chinese economic data and a strengthening US dollar, with losses attributed to softer-than-expected readings on investment, retail sales and industrial output. Copper dropped about $0.35/lb after a strong run-up, though the drop didn't fully erase recent gains.
Aluminum was 0.4% higher at $3,197.50/ton on the LME, while copper was 0.3% lower at $13,164/ton in mid-January trading, though current levels have moderated.
Agricultural Markets: China Deal Sparks Optimism
Grains
Corn futures slipped to around $4.70/bushel, retreating after China pledged to buy at least $17B annually in US agricultural goods through 2028 following Trump-Xi talks in Beijing. CBOT corn July settlement at 475.25¢/bu, with wheat at 667.25¢/bu as of May 19.
Wheat rose to 647.04 USd/Bu on May 25, up 0.12% from previous day and 18.99% higher year-over-year. The latest USDA outlook signaled ample US corn supplies extending into 2027, projecting production around 16B bushels with ending stocks at roughly 1.96B bushels.
China is pledging to buy 25 MMT of US soybeans in 2026, 2027 and 2028, raising questions about US processor reactions and potential acreage expansion.
Softs
Sugar futures eased toward 14.7 US cents, pressured by expectations of robust Brazilian supply, with StoneX estimating Central-South milling at 632.2M tons, the second largest harvest in history. Forecasts from multiple consulting firms point to a global deficit in 2026/27 crop, along with India's sugar export ban for at least four months, limiting downside.
Arabica coffee futures traded around $2.60/pound, near the lowest since November 2024, pressured by expectations of increased supply as traders monitor the incoming 2026/27 Brazil harvest, with weather conditions remaining favorable in producing areas.
Emerging Market Implications
Emerging markets enter 2026 with renewed strength, supported by resilient growth, robust capital inflows and shifting global monetary conditions, as investors increasingly turn to emerging economies for diversification amid developed market volatility.
The commodity price divergence creates winners and losers across EM economies. Divergence in commodity prices – with strong demand supporting metals and agricultural products while excess supply pressures oil – will be felt in corporate earnings.
Energy exporters face headwinds from supply normalization. As Middle East oil production rises, crude prices are expected to fall to an average of $89/b in Q4 2026 and $79/b in 2027, pressuring Gulf state budgets and Russia's economy.
Agricultural exporters, particularly Brazil and Argentina, benefit from Chinese commitments. US Trade Representative said China expects to make "double-digit billion" annual purchases of US farm products over the next three years, intensifying competition for market share.
Metals-dependent economies face mixed signals. Strong Chinese manufacturing activity data supported the demand backdrop, magnified by ample municipal debt borrowing for aluminum-intensive infrastructure development, supporting Latin American and African copper producers.
Key Data Points
| Metric | Value | Source | |--------|-------|--------| | Brent Crude | $104.25/bbl | OilPriceAPI May 25 | | WTI Crude | $96.60/bbl | OilPriceAPI May 25 | | Henry Hub Gas | $2.92/MMBtu | Trading Economics May 22 | | Aluminum | $3,676/ton | Trading Economics | | Corn (July) | 475.25¢/bu | USDA May 19 | | Wheat (May 25) | 647.04 USd/Bu | Trading Economics | | Arabica Coffee | ~$2.60/lb | Trading Economics | | Sugar | ~14.7 USc/lb | Trading Economics | | Middle East Supply Loss | 10.5M b/d | EIA STEO May | | US SPR Withdrawal | 10M barrels/week | Trading Economics |
FAQ
Q: When will the Strait of Hormuz fully reopen for oil shipments?
A: The EIA assumes the Strait remains effectively closed until late May with shipping traffic beginning to pick up in June, though oil shipments will not likely reach pre-conflict levels until later in 2026. Oil executives say even when reopening occurs, it will take several weeks, if not months, for flows to normalize.
Q: How significant is China's $17 billion agricultural purchase commitment?
A: China pledged at least $17B annually through 2028 after Trump-Xi Beijing talks, though China's Ministry clarified the two nations had only set a "guiding target" to expand trade without confirming the $17B figure. The commitment includes 25 MMT of soybeans annually for 2026-2028, representing substantial demand but subject to implementation uncertainty.
Q: Why are aluminum prices at multi-year highs despite copper weakness?
A: Aluminum demonstrated relative resilience due to fresh supply concerns, with the Iran conflict removing roughly 3M tons from the market, spare capacity near zero and inventories at a 55-year low. This supply constraint helps explain why aluminum has held up better than copper and other metals more sensitive to global growth worries.