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Investors grapple with Middle East curball scenarios
Investors struggled to determine whether the Middle East conflict is a marginal risk centered around a power struggle in Iran or a long-term war that could have ramifications on global trade and inflation. Donald Trump, the U.S. president, stoked confusion by suggesting that the U.S. Israeli and Iranian strikes on Iran that killed Supreme Leader?Ayatollah Ali Khamenei at the weekend could continue for weeks. Oil was the most dramatic market reaction, with prices that spiked then dropped sharply. Bitcoin rose, European stock markets fell, but U.S. indices were flat or higher. Government bond yields also rose. Joerg Kraemer is the chief economist at Commerzbank. He also believes that this scenario is most likely. J.P. Morgan analysts said that they expect a decline of one to two weeks in the prices of riskier investments, but this will create a "buy-the-dip" opportunity once the market has gotten over the initial pullback. Iran has retaliated against Gulf cities. Airlines have halted flights, and tankers transporting oil and other products have suspended transit through the Strait of Hormuz. Due to the complexity of the Islamic Republic’s ruling system, the biggest risk to?markets comes from the uncertainty about what will happen next in Iran. Oil prices, which have been rising for several weeks now, are dependent on what the oil producing countries do and the effects of the tanker passage through the Middle East. This has a huge impact on inflation and bonds around the world. The market scenarios assumed that the impact would be minimal, as it was during the "12-Day War", which took place in Iran in June last year, and not the spike in 2022 oil prices caused by Russia's invasion in Ukraine. Brent crude rose 6% to $77, a gain of?nearly 30% this year. However, it remains below the $100 analysts predict would be reached in an extended conflict. Analysts at TS Lombard stated that they were concerned about a possible repeat of the 2022 market, when both bonds and equities were pushed down as markets pondered long-term implications for energy supply. "The situation is still very fluid, but we remain committed to our original view that this is more of a squall than a full-blown oil crisis which will tip the global economy towards a sustained regime of stagflation." IS HISTORY A REPEATING FORMULA? Investors trimmed their rate-cut bets at major central banks, citing the inflationary implications of higher oil prices. U.S. Treasury rates shot up, with the 2-year yields set to make their largest daily gain in 4 months. This was due to a decline in expectations of a Federal Reserve rate reduction in June. The yields on Germany's 10-year Government Bond, the benchmark for the euro zone, are set to see their biggest jump since December. Barclays analysts wrote in a Saturday note that "history strongly argues in favor of selling the geopolitical premium when hostilities begin." What worries us is that investors may have learned about this pattern and are underpricing scenarios where containment fails. Other factors could also exacerbate the selloff if the conflict escalates, including existing concerns about the artificial intelligence boom or private credit markets. Mohit Kumar of Jefferies, an economist who was already critical last week about the markets' complacency on geopolitical issues, said: "We expect further market downside in the coming days." "At some future point, we would be willing to purchase the dip. But that seems far away for now." Analysts predict that Iran won't be able disrupt the trade in the Gulf and its impact on the oil price will be limited. Ed Yardeni of Yardeni Research in New York said: "We wouldn't... be surprised if any S&P 500 sell-off on Monday morning turned into a rally driven by expectations that oil prices will drop?once this latest Middle East conflict ends." Gold could also double on Monday. He said that bond yields could fall because of both the safe-haven market and future oil price prospects.
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How has the Strategic Petroleum Reserve been used by US presidents during wartime?
Although the U.S. does not plan to sell oil from its Strategic Petroleum?Reserve - the world's largest stockpile of emergency oil - presidents have used it in times of crisis to try to control fuel costs for U.S.?consumers. A U.S.-based source confirmed on Monday that the administration of Donald 'Trump does not have any plans to sell oil from the SPR. Analysts said that if the oil prices continue to increase following the U.S. and Israeli attacks against OPEC member Iran, which killed the Supreme Leader Ali Khamenei, as well as other top officials, then the administration may take another look. SPR holds 415.4 millions barrels of mostly sour oil, with a high sulfur content, that is suited to be processed by many U.S. refining plants. The crude oil is stored underground in salt caverns hollowed out on the coasts of Texas & Louisiana. The capacity is approximately 714 million barrels. Here's a look at how the SPR was used in wartime: RUSSIA INVADES UKRAINE Joe Biden, Trump's former president, ordered in March 2022 that 180 million barrels be released over six months. This was the largest ever sale from the emergency stock. Biden and Trump slowly purchased a small amount of oil to start replenishing that stock, but Congress has not provided enough money for this. ATTACK ON SAUDI ARABIA In 2019, the Houthis, a Yemeni group with ties to Iran, attacked Saudi Arabia. This led to the shut-down of over half the country's crude production. Trump, who was then serving his first term, stated that his administration was?ready to tap into the SPR in case of need. This did not occur as the oil production from Saudi Arabia’s Abqaiq and Khurais fields recovered quickly. LIBYA CIVIL WORRAGE Former President Barack Obama released 30 million barrels from the reserve in?June 2011 to counteract disruptions on global markets caused by the civil war in Libya, the oil producer. This sale was coordinated by the Paris-based International Energy Agency and resulted in another 30 million barrels being released from other members. OPERATION DESERT?STORM After the Iraqi invasion, George H.W. Bush sold approximately 21 million barrels in two phases. Bush sold approximately 21 million barrels over two phases. The U.S. had ordered a test sale of 3.9 million barrels in October 1990. After?U.S. In January 1991, after?U.S.
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Petrobras monitors Iran conflict and fuel price before making a decision
Petrobras, the state-owned oil company in Brazil, is watching closely?the fallout of conflict in Iran. It will be monitoring oil prices - which soared on Monday -- for the next seven days before making a decision?on fuel pricing. After the weekend attacks by Israel and the U.S., which killed Iran's supreme ruler, Ali Khamenei, global oil prices?soared?. Brent crude rose up to 13% on Sunday and about 8% at noon Brasilia Time, helping Petrobras shares, which export?crude. One source, who spoke on the condition of anonymity, said that this week would be one of observation and could lead to an announcement next week. However, there are still many uncertainties. Petrobras also needs to monitor the exchange rate as it is a part of the equation for fuel pricing, according to the sources. One person said that a prolonged conflict in the United States could lead to capital flight, and Brazil might become a destination for some flows. He explained that a weaker dollar would offset higher oil prices. Petrobras also monitors the impact of the war on oil and fuel production, as well the logistical bottlenecks caused by the conflict. Concern about the STRAIT of HORMUZ Thirdly, the Strait of Hormuz could be closed. This is where 20% of all the oil in the world flows. Although the strait is not fully closed, there have been reports that over the weekend vessels stopped moving or were targeted. The total closure of the Strait would have a significant impact on global oil flows, and could lead to a major change in shipping routes. Petrobras would benefit, but might have to purchase 'potentially expensive' crude and derivatives in other regions. Petrobras imports crude oil daily to mix with its production. This is another issue that needs attention. Claudio Schlosser, Petrobras Executive Director of Logistics, Commercialization and Markets, says the company still has options and flexibility to compete despite the Middle East conflict. Schlosser said that Petrobras had alternative routes outside of the conflict zones, which gave us security and competitive costs for our operation, while preserving 'our margins. He refused to comment on possible changes in Petrobras fuel pricing. He said that most imports are from outside of the crisis area, and that "the few which do exist" can be redirected. Reporting by Rodrigo Viga Gaier, Writing by Oliver Griffin, Editing by Roberto Samora & Andrea Ricci
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Trump's war against Iran is a serious risk to US and European aluminum consumers
The war between the U.S. & Iran is likely to cause a prolonged disruption in Middle East aluminium imports, which will hit European and U.S. consumers the hardest. This is because they are heavily reliant on this region for supply. The U.S.,?Israel and other countries attacked Iran on Saturday in a move which could result in the closure of Strait of Hormuz. This important trade route was disrupted due to Iranian attacks against U.S. military base. The impact of sustained disarray will be significant According to BNP Paribas commodities analyst David Wilson, the Arabian Gulf has around 7 million tons smelting capability, which is around 8% global capacity. He said that the impact of a sustained disruption in shipments to the region would be significant, both for the price and the physical premiums. This is especially true in Europe. One analyst said that 75% of Middle Eastern aluminum production is exported. MIDDLE EAST ALUMINIUM EXPORTS Trade Data Monitor reports that Europe imported around 1.3 millions tons of primary and alloyed aluminum from Egypt and the Middle East last year. TDM reports that U.S. imports from the Middle East of primary and alloyed aluminum accounted for nearly 22 percent of its total of 3.4 million tonnes last year. Impact on prices The London Metal Exchange's prices of metals used in the transport, construction, and packaging industries reached a one-month high on Monday at $3,254 per metric ton. The physical premium that European buyers pay over the LME price to cover freight, taxes and handling costs jumped to $378 per ton last week. This is up $20 since the beginning of the week. U.S. Premiums are around $1.04 per lb, or $2.292 per ton. This is due to Donald Trump’s?50% tariffs on imports that were imposed last June. ALUMINIUM PRODUCTION COSTS If energy costs continue to rise, aluminium production costs will also increase. The war in the Middle East has already pushed up the price of natural gas and oil, which is a factor that accounts for around one-third of aluminum smelting costs. (Reporting and additional reporting by Polina Dewitt; editing by Jan Harvey).
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Gold prices rise amid fears of Middle East conflict
Gold as a safe-haven asset gained on Monday due to escalating fears of a prolonged conflict in the Middle East following?U.S. Israeli and U.S. strikes against Iran have boosted the price of safe-haven gold. Gold spot gained 2%, to $5,384.41 per ounce, by 1406 GMT, after reaching a session-high of $5,418.50. Prices reached a record high of $5,594.82 in January. U.S. Gold Futures increased 2.9% to $5.397.40 per ounce. David Meger is the director of metals trading for High Ridge Futures. "I believe that it is the uncertainty that will more than likely'support prices. The U.S. and Israeli air war against Iran has continued to expand with no end in site. Israel responded to Hezbollah's?attacks, while Tehran fired missiles, drones, and rockets at Israel, Gulf states, and a British airbase in far-away Cyprus. SP Angel analysts noted that the increasing geopolitical fragmentation prompted BRIC Central Banks to reduce their exposure in dollar-denominated asset to gold. They added that they expect that this trend will continue. Gold, which has long been regarded as the safest asset during times of uncertainty, is up nearly?25% this year. The rally is a continuation of its 64% rise in 2025. This was fueled by central bank purchases, inflows to exchange-traded funds and a shift towards looser U.S. financial policy. BNP Paribas, meanwhile, said that it sees the physical gold investment demand as being a major driver for this year. The bank said that physical gold ETFs had already amassed about 2 million ounces of gold this year, and they expect Chinese investors to buy more than in 2025. This week, the market is going to be watching for the ADP Employment Report, the weekly claims of joblessness and the non-farm pay reports. Silver spot?eased by 0.6% to $93.23 per ounce, after reaching its highest level since January 30. Spot palladium fell by 1.1%, to $1,767.00, while spot platinum dropped 1.7%, to $2,324.40. Ashitha Shivprasad reports from Bengaluru. Additional reporting is by Noel John, Kavya Baliaraman and Kavya Balaraman. Editing is by David Goode.
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Asia's margin on naphtha reaches four-year high due to supply concerns
Profit margins for Asia's naphtha refinery As the Middle East conflict entered its third day, global?traders and shippers were spooked. Feedstock prices have risen and Asian buyers will have few options for alternative supplies if the disruption continues, according to a Singapore-based official of a major European trader. This is after U.S. The official said that "they (petrochemical manufacturers) will soon have to reduce their operating rates." Estimates from traders indicate that nearly 4 million tons of Asia bound naphtha traverse the Strait of Hormuz every month. A?third of this lands?in South Korea. The Asian naphtha refinery margin LSEG data show that Brent crude prices rose to $134.30 a metric tonne on Monday. This was the highest price since April 2022. Benchmark naphtha price On Monday, the price of a metric tonne jumped to $733 from $645.50 during the previous session. Haldia Petrochemicals in India, the largest?naphtha purchaser for the country, said on Monday that it would increase sourcing domestically if the war continued. The company sources its 700,000 tons of ethylene cracker's light naphtha primarily from the Middle East. It supplements this with supplies from local refiners when specifications match. In the last two months, Russia has increased its naphtha flows to port storage hubs and ship-to-ship transfer (STS) hubs as key buyers have scaled back their imports due to Western sanctions. Reporting by Mohi Nairayan, Editing by Kirby Donovan
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Gold prices rise by more than 2% after strikes against Iran prompt a rush for safe havens
Gold prices rose by more than 2% on Monday as U.S. and Israel strikes against Iran continued - with no end in sight. This stoked fears of a wider geopolitical & economic uncertainty, which sparked a flight into safe havens. Gold spot prices rose 2.1% at 1255 GMT to $5,388.59 per ounce, after reaching a four-week high in the previous session. The metal reached a high of $5,594.82 in January. U.S. Gold Futures increased 3%, to $5404.20 an ounce. Ricardo Evangelista, ActivTrades analyst, said: "We're seeing an increase in'safe-haven assets. This is reflected both in the gains of gold as well as the losses in risk-related assets such stocks." The global shares fell on Monday as the conflict in the Middle East appeared to be a long-term affair, which could disrupt the global economic recovery. It also could reignite inflation fears. Iran retaliated against U.S. and Israeli attacks by destroying air traffic in the Gulf and stopping oil and product tankers from passing through the Strait of Hormuz. Israel increased its attack on Hezbollah militants backed by Iran in Lebanon on Monday. This year, gold has risen in value due to the increased global economic uncertainty and political turmoil. Gold's latest rally is a continuation of its 64% increase last year. This was driven by central bank purchases, inflows to exchange-traded fund and expectations that the U.S. will ease monetary policy. Carsten Menke, a Julius Baer analyst, said: "The situation is still highly uncertain. The escalation fuels the bullish sentiment in gold and silver markets. This provides support for prices and stability to a portfolio in a period of increased volatility on financial markets." BNP Paribas raised its gold price forecast for 2026 by 27%, to $5,620 an ounce. It also said that prices would peak at $6,250 per ounce before the end of the year due to persistent geopolitical and macro-economic uncertainty. Investors are focusing on the U.S. labour statistics due to be released this week. These include the ADP Employment Report, the weekly jobless claims and the non-farm?payrolls report. Silver spot was also up 1.4%, at $95.10 per ounce. It had reached its highest level in a whole month earlier in the day. Spot platinum dropped 0.3% to $2.358.33 an ounce while palladium rose 0.6% to $1.797.47. (Reporting from Bengaluru by Noel John; Additional reporting by Ashitha Shivprasad, Kavya Baliaraman and Sumana Niandy; Editing and Diti Pjara.)
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McGeever: The war in Iran traps Treasuries' investors in an oil stagflationary dilemma.
U.S. Treasuries have just had their best month since last year. Investors must now decide whether the sudden outbreak of war in 'the Middle East' will boost bond demand or if a surge in oil prices, which is accompanied by inflationary pressures, will cause it to crash. The U.S. and Israeli attack on Iran, which killed the Supreme Leader Ayatollah Khamenei,?marked a dramatic escalation of regional tensions. The simmering conflict has already helped to push Brent crude oil above $70 per barrel in recent weeks, and also sparked investor interest in Treasuries, pushing the 10-year yield down below 4%. These two moves both accelerated dramatically in the early trading of Monday. Brent oil soared by as much as 14 percent, and Brent broke through the $80/bbl mark, amid fears of disruptions in supply from one of the world's largest producing regions. The 10-year Treasury yield fell to 3.90% - its lowest level since last April. The buying frenzy cooled down, particularly at the short end, where the yield on the 2-year Treasury note flipped and traded 6 basis points higher. Bond investors face a dilemma: should they buy Treasuries as a hedge against a possible slump in risky assets due to a spike in geopolitical risks, or sell them in anticipation of inflation and a possible Federal Reserve response from the soaring price of oil? Which half of "stagflation's" dynamic will win out? FLIGHT TO SAFETY Investors' first instinct was to "run for cover". The allure of Treasuries, and other high-rated government bonds, seemed overwhelming as stocks fell around the globe. On Monday, the majority of Asian and European benchmark equity indexes dropped between 1% to 2%. European yields also initially declined. It's understandable given the potential impact of high oil prices on the economy. Jordan Rochester, a Mizuho analyst, estimates that an increase of $10/barrel will knock off 10-20 basis point growth in the next year. Oil has already risen by $20/bbl over the past six weeks and could soon reach $100/bbl. The global economy would be severely affected if crude rose above this threshold and stayed there. The "bull" case is strong for Treasuries, especially when you consider the looming threat of artificial intelligence on white-collar employment in the next few years. OIL NOW +13 % YEAR-ON-YEAR The "risk-off" trade that immediately followed the U.S. - Israel strikes sparked a flood of demand for Treasuries. However, a persistent rise in oil prices ultimately pushes all other prices higher. Analysts at Rabobank note that a significant increase in oil prices is inflationary. "Just as it was during the Russian invasion of Ukraine," they say. According to economists, a $10 increase in oil can boost the annual inflation rate by up 0.2 percentage points. This might not seem like much. The Fed's preferred annual inflation measure is already at 3%, and it's creeping up. So every increase counts. Mizuho’s Rochester said oil at $100-$130/bbl for any period of time would take Fed rate reductions?completely out of the picture, and probably trigger a mild cycle rate-hiking "at the least". The broad-based price pressures are already pushing prices higher in the U.S. The data on producer price inflation for January, released last Friday, was hotter than anticipated. And the deflationary pressure from oil is now turning into an inflationary one. Brent crude's price increased last week. It will be the very first time since 2024 that oil will have a positive base effect on inflation calculations. Brent crude was nearly 30% cheaper in early January than it had been a year before. It is now 13% higher than it was a year ago. This is a major shift in the inflation models that will cause Fed officials to be on alert. If the $100/bbl oil price is sustained, it could result in a CPI increase of 0.8-1.5% if the increased gasoline prices are fully reflected. It is possible that this figure could be significantly underestimated, if rising oil prices also increased housing, transportation, food, and other costs. Treasuries have fallen from the highs they reached on Monday morning. The conflict in the Middle East, which appears to be spreading, is highly fluid. As a result sentiment can change in an instant. The jobs of Treasuries' investors just got harder. You like this column? Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
Miner SQM sees lithium sales jumping 15% in first quarter
SQM, a lithium producer in Chile, expects the first quarter of 2026 to be a record-breaking period for sales, with a 15% increase over the previous year.
The company is experiencing a strong demand for increased volume from Asia-Pacific clients, especially in China.
KEY GUIDANCE
* Lithium price in the first three months is expected to be "substantially" higher than the fourth quarter level of?approximately 10 per kilogram.
The full-year 2026 lithium price is expected to be closer to the current levels than 2025's lows, but volatility is anticipated.
The total?lithium production is expected to reach approximately 260,000 metric tonnes LCE by 2026. This represents an increase of about 234,000 metric tons from 2025.
* In?Australia, the Kwinana Refinery's ramp-up timeframe was extended to 2027 because of intermittent?operational problems, which caused 2026 production to lean towards concentrate sales.
Dividend payments due to Codelco joint venture in April or May.
Salar?Futuro Project Environmental Application is expected to be submitted by mid-year.
(source: Reuters)