WHY the Iran war is shaking global oil, gold and food markets

Oil prices surged sharply on Monday as the expanding war involving Iran rattled global commodity markets and raised fears of prolonged energy supply disruptions. Brent crude briefly climbed toward $119.50 per barrel, marking one of the largest daily jumps in recent years. The price shock came as traders reacted to risks surrounding Middle East oil production and shipping routes as cited by reuters .

The market reaction reflects how closely global commodities are tied to stability in the Gulf region. Roughly one-fifth of the world’s oil supply normally passes through the Strait of Hormuz, a key maritime corridor that has been heavily disrupted during the conflict. Any interruption to tanker traffic or regional production can rapidly tighten supply and drive prices higher.

The surge in crude oil quickly spread across other commodity markets. Agricultural products linked to biofuels rallied, with vegetable oils such as Malaysian palm oil and soybean oil climbing sharply as traders tracked the jump in energy prices. Wheat and corn also moved higher, reflecting concerns that higher fuel costs could push up global food production and transport expenses.

At the same time, gold prices fell more than 2%, even as geopolitical tensions intensified. Analysts said the drop was largely driven by a stronger U.S. dollar and rising expectations that central banks may keep interest rates higher for longer if energy-driven inflation accelerates.

Industrial metals showed mixed reactions. Aluminium rose to multi-year highs on fears that Middle East supply disruptions could affect production and shipping, while other metals such as copper and tin weakened under pressure from the stronger dollar.

Markets across Asia, Europe and the United States also reacted to the energy shock, with investors moving toward the dollar as a safe-haven asset and global equities declining. Analysts warn that if the conflict continues to disrupt Gulf energy exports, the surge in oil prices could feed into inflation and economic growth risks worldwide.

For commodity traders and policymakers alike, the key concern is whether the conflict will escalate further or begin to stabilize. Prolonged disruption in one of the world’s most critical energy corridors could keep oil prices elevated and ripple through fuel, food and manufacturing costs globally.

Source : reuters