Oil Surges Amid Hormuz Blockade Threat

Energy markets opened higher after the US threatened to block traffic through the Strait of Hormuz following the failure of weekend talks with Iran

Energy – Oil Prices Surge Amid Hormuz Blockade Threat

Oil markets rallied sharply on Monday after US-Iran talks collapsed over the weekend. ICE Brent jumped more than 9% in early trade, while NYMEX WTI pushed above $105/bbl. In response, the US military plans to implement a blockade of all maritime traffic entering and exiting Iranian ports from 10:00am Monday Washington time, while allowing vessels not calling at Iranian ports to continue transiting Hormuz. Despite this, two fuel tankers attempted to exit the Gulf via routes close to Iran’s coastline, marking the first such movements since the blockade was announced.

European gas prices also surged. Front‑month TTF futures climbed nearly 18% to intraday highs above EUR51/MWh. The breakdown in peace talks has revived concerns over the conflict, now in its sixth week, while renewed US threats to block Hormuz have intensified fears of near‑term supply tightness. Around 20% of global LNG supply has been disrupted, with LNG exports through Hormuz already suspended for more than a month. European gas prices have been up over 50% since the US and Israel first struck Iran in late February.

Positioning data points to growing uncertainty. Speculators reduced their net long in ICE Brent by 5,583 lots to 424,270 lots as of last Tuesday, driven by a 4,525‑lot fall in gross longs. By contrast, speculators increased their net long in NYMEX WTI by 7,121 lots over the week, taking it to 137,838 lots.

US drilling activity remains subdued. Baker Hughes data shows the US oil rig count unchanged at 411 as of 10 April, as price volatility and weaker margins continue to weigh on investment. Total rigs fell by three to 545, leaving the count 38 rigs below year‑ago levels.

Looking ahead, attention turns to OPEC’s monthly market report due later on Monday, which should provide updated guidance on supply balances amid the escalating geopolitical risks.

Metals – Aluminum Jumps to Four‑Year High

Aluminum prices climbed to a four‑year high as rising geopolitical risks in the Middle East intensified concerns over shipments and production. US President Donald Trump’s move to block the Strait of Hormuz has raised the risk of further disruption to metal flows, with LME aluminum up as much as 2% on the session. The market is particularly exposed, given that the Middle East accounts for around 9% of global aluminum output and is a key supplier to Europe. Any sustained disruption to shipping through Hormuz would tighten availability and support regional premiums, especially as inventories remain relatively lean. Elevated energy prices are adding to the upside pressure for aluminum, reinforcing cost support for smelters at a time when power markets remain highly volatile.

Other industrial metals traded weaker after the failure of US-Iran negotiations. The sharp rise in oil and gas prices is reviving concerns over the global growth outlook, weighing on demand expectations for more cyclical metals.

Meanwhile, the LME cash/three‑month aluminum spread has surged into deep backwardation, widening to $91.5/t – the strongest since 2007 – from a $12/t contango at the onset of the conflict.

CFTC data points to more cautious positioning across industrial metals. Speculators trimmed their net long in COMEX copper by 488 lots to 38,804 lots as of 7 April, as increases in both gross longs (+1,758 lots) and gross shorts (+2,246 lots) signalled rising two‑way risk. In silver, net longs were cut by a further 777 lots for a second consecutive week, falling to 10,039 lots, driven by a reduction in gross longs.

Agriculture – Wheat Edges Lower on Supply‑Driven Pressures

CBOT wheat extended losses for a third consecutive session on Friday, ending the week down around 4% – its steepest weekly decline since June 2025. Improving US weather conditions and expectations of ample supply weighed on prices, with forecast rainfall across the southern plains and the USDA’s outlook for higher global availability reinforcing oversupply concerns. Money managers shifted back to a net‑short position, with shorts exceeding longs by 5,633 lots over the week, driven largely by a sharp reduction in gross longs. Sentiment was further eased by reduced concerns over fertiliser supply disruptions following a temporary US-Iran ceasefire.

Across other grains, positioning also softened. Speculative net longs in CBOT corn fell for a second consecutive week, declining by 49,342 lots to 218,632 lots as of 7 April, largely due to long liquidation. Net long positions in soybeans dropped by 23,777 lots to 189,630 lots, reflecting a reduction in gross longs amid ongoing trade tensions with China.

Meanwhile, India’s urea production is expected to normalise from Friday, as improved natural gas availability allows previously idle plants to resume operations. Output had fallen sharply in March – by around 800kt from typical monthly levels above 2.6mt – due to gas supply constraints and maintenance shutdowns. The government has since increased gas allocations to the fertiliser sector to around 95% of average consumption, up from 70-75%. However, risks remain, with the US-Iran ceasefire appearing fragile following the failure of talks over the weekend in Islamabad.

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