Commodity markets rally as Middle East conflict disrupts supply chains

Commodity markets rallied last month as the conflict in the Middle East disrupted global supply chains, driving gains beyond oil into industrial metals, fertilizers and agricultural products amid mounting supply concerns.

The oil shock widened into a broader cycle of commodity inflation as supply chain disruptions and uncertainty over monetary policy and foreign exchange markets weighed on global markets in April.

Precious metals posted mixed results. Gold fell 1% as inflation concerns tied to higher oil prices, rising bond yields and a stronger US dollar pressured demand. Silver declined 1.8% per ounce under the same macroeconomic conditions.

Platinum rose 1.6% as a growing global supply deficit and demand linked to green energy supported prices, while palladium climbed 3.3%.

Copper rebounded strongly in April, rising 6% per pound on improving signs of physical demand and continuing concerns over supply chain vulnerabilities. Growing investment in renewable energy, grid infrastructure, battery storage and electricity generation capacity also supported prices.

Copper is expected to face structurally strong demand in the coming years because of its central role in the energy transition.

Aluminum gained 1.3% as supply shortages linked to the Middle East conflict disrupted smelter operations in the Gulf, limiting near-term supply recovery and adding to broader supply risks.

Nickel surged 13.1% after Indonesia raised reference base prices for all nickel ore grades, a move reportedly aimed at boosting government revenue amid budget pressures.

Zinc rose 4.1% on expectations of tighter supply, according to the International Lead and Zinc Study Group, while lead increased 3.5%.

Energy markets also remained volatile. Brent crude rose 7.9% amid continuing tensions in the Middle East and risks surrounding the Strait of Hormuz, extending gains for a fourth consecutive month.

The near-complete closure of the strait continued to disrupt energy markets.

Natural gas prices, however, fell 8.1% as hopes for peace between the United States and Iran offset geopolitical concerns.

Agricultural commodities also saw broad price swings. Wheat rose 3.3% per bushel on drought concerns, high fertilizer costs and historically low planting areas, all of which are expected to tighten supply.

Corn and soybeans gained 3.7% and 2.1%, respectively, supported by higher oil prices.

Rice fell 5.1% because of rising inventories and weakening demand concerns.

Coffee declined 4.3% on expectations of a record harvest in Brazil and forecasts of softer demand.

Cotton jumped 17.4% because of drought and frost risks in the United States.

Cocoa prices rose 8.2% amid fertilizer shortages and concerns that the El Nino weather pattern could affect production.

*Writing by Emir Yildirim