As the conflict between the United States, Israel and Iran enters its 13th day, escalating attacks have begun disrupting global commodity markets beyond oil and gas. Explosions and sirens across the region reflect a widening conflict that has rattled energy routes and trade flows.
Since the war began on February 28 with joint US-Israeli strikes on Iran, tanker movement through the Strait of Hormuz has slowed sharply.
The narrow waterway normally carries about one-fifth of the world’s oil and gas shipments, but many vessels are now avoiding the route because of security risks.
The disruption is also spreading to other commodities essential to the global economy, including aluminium, fertilisers, ethanol and helium.
Aluminium
Aluminium prices jumped to their highest level in almost four years Monday after a halt to deliveries from major aluminium smelters in Qatar and Bahrain, forcing buyers to hunt for replacement metal from Asia.
Producers in the Persian Gulf accounted for about 8% of the world’s supply of aluminium last year, according to the International Aluminum Institute.
Sulfur and urea
Sulfur, produced during oil and gas refining, is widely used in fertiliser production and industrial processes.
Nearly half of the world’s sulfur supply is currently trapped on the Persian Gulf side of the Strait of Hormuz, according to CRU Group.
About one-third of globally traded urea, normally passes through the Strait of Hormuz. It’s produced in the Middle East because natural gas is an essential feedstock for fertilizer. Urea prices have risen as much as 35% since the war began. Urea prices have surged by as much as 35% since the war began.
Ethanol and sugar
In Brazil, the world’s largest sugarcane producer, mills can use the crop to produce either sugar or ethanol fuel. When ethanol prices rise, mills tend to focus on more profitable fuel, and that may be about to happen again.
With oil prices rising sharply due to the conflict, ethanol prices jumped around 10% on Monday, which could prompt producers to divert more cane toward fuel production in the upcoming harvest.
Helium
Helium production has also been affected after Iran struck Ras Laffan Industrial City, the natural gas hub in Qatar where the country’s helium facilities are located. QatarEnergy operates key LNG facilities there.
Qatar produces roughly one-third of the world’s helium, making it the second-largest supplier after the United States. But production there has been disrupted since Iran struck the Ras Laffan Industrial City, the natural gas hub where the country’s helium facilities are.
More than a quarter of the world’s helium supply could be cut off if the Strait of Hormuz remains closed, Phil Kornbluth, president of Kornbluth Helium Consulting told CNBC.
Cargo carrying Indian rice, Australian meat and Indonesian coffee has been delayed or forced to take alternative routes. Retailers such as Lulu Group have begun chartering cargo flights to transport fresh food.
Iran, the top supplier of fresh fruit and vegetables to the UAE, has banned exports of all food and agricultural products until further notice, the semi-official Tasnim news agency reported last week.
Meanwhile, the UAE’s Al Khaleej Sugar refinery says it holds enough sugar reserves to meet domestic and regional demand for up to two years.
Around 400,000 tonnes of Indian basmati rice are stranded at ports or at sea due to vessel shortages.
Industry experts warn that higher logistics costs and supply-chain disruptions could eventually push up food prices if the conflict continues.
Dubai works to protect food supplies
Despite the disruption, authorities in the United Arab Emirates say essential supplies remain stable. The country imports around 80-90% of its food requirements due to limited arable land and water scarcity.
For now, the UAE govt is keeping the shelves packed and has sought to reassure residents there are enough reserves to last for several months and is monitoring prices.
An analysis by Altana, a New York-based supply-chain firm, showed that Saudi Arabia, Iraq, the UAE, Kuwait, Qatar, and Bahrain together imported an estimated $10 billion in cereals, meat, and fresh produce. Nearly all of it arrives by sea, transiting through the Strait of Hormuz.
