Strait of Hormuz Closure Divides Commodity Markets: Metals Struggle Amid Oil Surge

Hormuz blockade fractures commodities: oil hits multi-year highs on supply fears, while metals slump under a strong dollar and Fed policy. OPEC+ meets as WTI inverts vs Brent.

The global commodity landscape has fractured into two distinct camps following the unprecedented disruption of oil shipments through the Strait of Hormuz. While energy prices are soaring to multi-year peaks, precious and industrial metals are facing intense downward pressure. A potent combination of rising bond yields, a strengthening US dollar, and expectations that the Federal Reserve will maintain its current monetary policy are simultaneously weighing on gold, silver, and copper. The conflict involving Iran is setting the tempo for raw materials, but not all are moving in the same direction.

Crude Oil Benchmarks Reach Elevated Levels

In the energy complex, Brent crude is trading at $109.03 per barrel. This represents a gain exceeding 28% compared to the previous month and roughly 37% year-to-date. With a 52-week range spanning from $58.40 to $119.50, the current price sits firmly in the upper third.

Market attention is focused on a special OPEC+ meeting scheduled for Sunday, where the alliance is expected to decide on raising production quotas. According to two sources familiar with the discussions who spoke to Reuters, eight cartel members are negotiating an increase. While the practical impact would be minimal as long as the Strait remains blocked, such a move would signal a readiness to ramp up output once the vital shipping lane reopens.

Saudi Arabia and the United Arab Emirates are already utilizing alternative export routes. Saudi shipments via the Red Sea port of Yanbu have climbed to nearly 4.6 million barrels per day, approaching its capacity limit.

The US Energy Information Administration (EIA) forecasts that Brent will remain above $95 per barrel for the next two months. It projects a potential decline below $80 in the third quarter, possibly falling to around $70 by year-end. However, this outlook is entirely contingent on the duration of the current conflict.

An Unusual Inversion in the Oil Market

West Texas Intermediate (WTI) crude is priced at $112.04 per barrel, marking an increase of over 95% since the start of the year. Notably, WTI is currently trading above Brent, a rare reversal of the typical market structure where the global benchmark usually commands a premium. This inversion indicates traders are using WTI as a primary vehicle to speculate on the length of US involvement in the Iran conflict.

Analysts at J.P. Morgan warn of a dramatic drawdown in reserves. They estimate OECD crude stocks could fall by approximately 166 million barrels in April and a further 67 million in May, approaching the operational minimum of 842 million barrels. "The system is not absorbing the shock—it is depleting its buffers while demand is being forcibly rationed," the bank's analysts stated.

A temporary pullback occurred on Wednesday after President Trump suggested the war could end within two to three weeks. He stated Iran had requested a ceasefire, which he would consider under the condition that the Strait of Hormuz is "open, free, and clear." The realism of this scenario remains uncertain.

Precious Metals Face Headwinds

Gold's Bearish Turn
The gold price stood at $4,677 per ounce yesterday, a mere $2 increase from the prior day but still $1,640 higher than its value a year ago. This impressive figure masks a significant recent shift: since hitting a record high above $5,600 in January, gold has lost more than 20%, technically placing it in bear market territory.

Morgan Stanley strategist Mike Wilson interprets this dynamic as a surprisingly positive signal—for the equity market. The ratio of the S&P 500 to gold has risen by 12% since the war began, which Wilson views as a bullish indicator for US stocks. For gold investors, this represents a double-edged sword, as capital currently appears to be flowing from precious metals into equities.

Despite the correction, medium-term price targets from major institutions remain ambitious:
* ANZ has raised its target for Q2 2026 to $5,800, up from a previous forecast of $5,400.
* Deutsche Bank cites $6,000 as its base-case scenario for the end of 2026.

Many analysts view the sell-off as a healthy pause following an overheated rally. The overarching uptrend since 2025 is considered intact, supported by geopolitical risks and sustained demand from China and India. The key question is whether elevated bond yields and dollar strength will abate, or if gold must wait for a de-escalation in the Gulf to recover.

Silver's Sharp Retreat from Record Highs
Silver is trading around $72.99 per troy ounce (approximately €63.29), having fallen over 2% in recent days. The decline is stark from its late-January peak, when the metal set a new all-time high above $121. Some weeks in March even saw double-digit percentage losses.

The trigger for the recent weakness was President Trump's announcement of escalating attacks on Iran, which stoked inflation fears and shifted market expectations. Instead of pricing in two interest rate cuts for 2026, as was anticipated before the conflict, markets now expect no monetary easing this year. This shift is particularly damaging for a non-yielding asset like silver.

Structurally, the picture is different. The silver market is in its fifth consecutive annual deficit. Cumulatively, since 2021, the market has fallen short by approximately 820 million troy ounces. Industrial applications account for over 50% of total demand, with solar panel manufacturing alone consuming 230 million troy ounces annually.

From a chart perspective, the next resistance level lies at $83.75, with the all-time high at $121.64. Key support levels are found at $64.10 and $61.02. Many observers interpret the current phase not as a trend reversal but as a consolidation at a high level. The structural deficit provides long-term support, but short-term movements are dominated by interest rate expectations and dollar strength.

Copper's "Supercycle" Pauses Amid Oversupply

Copper has fallen to $5.61 per pound, representing a year-to-date loss of roughly 10%. The primary cause is ample supply, which is pressuring prices. Inventories in London Metal Exchange (LME) warehouses are near a six-year high, while stocks at the Shanghai Futures Exchange (SHFE) are close to their highest level since records began.

The long-term narrative of a copper "supercycle," driven by data centers, power grids, and electric mobility, remains valid. In the near term, however, oversupply is curbing prices. Higher energy costs resulting from the Iran conflict further cloud the demand outlook.

Analysis from leading banks presents divergent views:
* Goldman Sachs forecasts LME copper prices between $10,000 and $11,000 per tonne for 2026, underpinned by strong demand growth from grid and energy infrastructure.
* JP Morgan is significantly more optimistic, anticipating a global refined copper deficit of approximately 330,000 tonnes this year.

Recent signals from China have been mixed. The Manufacturing Purchasing Managers' Index (PMI) for March fell to 50.8, below the expected 51.6 and notably lower than February's 52.1. Approximately 60% of global copper demand stems from the electrical and energy sectors—industries poised to benefit long-term from the energy transition but suffering short-term strain from high energy costs.

The Central Role of the Strait of Hormuz

The dividing line in commodity markets is drawn by a single maritime chokepoint. As long as the Strait of Hormuz remains obstructed, Brent and WTI reap the benefits of a supply shock. Conversely, gold, silver, and copper suffer under the resulting inflationary pressure and a robust US dollar.

The upcoming OPEC+ meeting may provide the first signal of the next phase. A successful reopening of the strait would likely lead to a rapid retreat in oil prices, allowing precious metals to rally. If the conflict remains unresolved, the world risks a continued depletion of global oil reserves alongside stagnant metal prices. President Trump's two-to-three-week prognosis for an end to the war appears optimistic, and market pricing does not yet reflect this scenario.