As the conflict between the United States, Israel and Iran enters its thirteenth day, escalating attacks have begun to disrupt global commodity markets beyond oil and gas. The explosions and sirens across the region reflect the expanding conflict that has rocked 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.
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The narrow waterway normally carries about a fifth of the world’s oil and gas shipments, but many ships are now avoiding the route because of security risks.The disruption also extends to other commodities essential to the global economy, including aluminium, fertilizers, ethanol and helium.
Aluminum
Aluminum prices jumped to their highest level in nearly four years on Monday after deliveries from major aluminum smelters in Qatar and Bahrain were halted, forcing buyers to look for an alternative metal from Asia.Producers in the Arabian Gulf accounted for about 8% of the global aluminum supply last year, according to the International Aluminum Institute.
Sulfur and urea
Sulfur, which is produced during oil and gas refining, is widely used in fertilizer 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 the CRU Group.About a third of the urea traded globally usually passes through the Strait of Hormuz. It is produced in the Middle East because natural gas is an essential raw material for fertilizers. Urea prices have risen by up to 35% since the start of the war. Urea prices have risen by up to 35% since the start of the war.
Ethanol and sugar
In Brazil, the world’s largest sugarcane producer, factories can use the crop to produce sugar or ethanol fuel. When ethanol prices rise, plants tend to focus on the more profitable fuel, and that may be about to happen again.With oil prices rising sharply due to the conflict, ethanol prices jumped about 10% on Monday, which could prompt producers to divert more sugarcane toward fuel production in the next harvest.
Helium
Helium production was also affected after Iran struck Ras Laffan Industrial City, Qatar’s natural gas hub where the country’s helium facilities are located.
Qatar Energy Company operates major LNG facilities there.Qatar produces nearly a 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 Ras Laffan Industrial City, the natural gas hub where the country’s helium facilities are located. 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.
Delay and forwarding: Cargoes carrying Indian rice, Australian meat and Indonesian coffee were delayed or had to take alternative routes. Retailers such as Lulu Group have started chartering cargo flights to transport fresh food items.Food exports stopped: Iran, the largest supplier of fresh fruits and vegetables to the UAE, has banned the export of all food and agricultural products until further notice, the semi-official Tasnim news agency reported last week.Meanwhile, Al Khaleej Sugar Refinery in the UAE says it has enough sugar reserves to meet local and regional demand for up to two years.Rice shipments stuck: About 400,000 tons of Indian basmati rice were stranded in ports or at sea due to a lack of ships.High logistics costs: Industry experts warn that rising logistics costs and supply chain disruptions could eventually lead to higher food prices if the conflict continues.
Dubai is working to protect food supplies
Despite the disruption, authorities in the UAE say essential supplies remain stable. The country imports about 80-90% of its food needs due to limited arable land and water scarcity. Currently, the UAE government is keeping its shelves stocked, seeking to reassure residents that there are sufficient reserves to last several months, and monitoring prices.An analysis by Altana, a New York-based supply chain company, showed that Saudi Arabia, Iraq, the United Arab Emirates, Kuwait, Qatar and Bahrain collectively imported an estimated $10 billion in grains, meat and fresh produce. Almost all of it arrives by sea, passing through the Strait of Hormuz.