Research Briefing | Feb 27, 2024

Commodity markets shrug off Red Sea attacks

Commodity markets have barely reacted to Red Sea attacks, and we think the impact on prices will be minimal. As a result, we have not changed our price forecasts beyond a very short-term upward revision to crude oil and gold prices.

What you will learn:

  • Commodity markets are much less exposed to disruptions in the Red Sea compared to container shipping, due to a smaller share of the market that uses this route, and the greater flexibility that commodity supply chains offer.
  • Current market conditions have also insulated commodities from potential price gyrations. Commodity markets are well supplied with a strong production forecast for the year and ample stock levels. Demand also remains unspectacular.
  • The product most at risk is jet fuel, owing to the high share of that product that transits the Red Sea, tight market conditions for the commodity itself as well as the tanker market. The tight tanker market also raises the risk for crude oil.
  • We could see greater repercussions for commodity markets should disruption extend well beyond six months, were vessels to avoid the Red Sea in greater numbers, or if downstream supply chains are severely affected.
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