Financial Focus - Warring Currents in the Commodity Markets
Published March 2026
The past three months have been marked by heightened geopolitical tensions and renewed volatility across global commodity markets. In particular, the escalation of conflict involving Iran and disruption to shipping through the Strait of Hormuz have introduced uncertainty into key global supply chains. While the immediate focus has been on crude oil and natural gas, the implications extend more broadly across the commodity complex. The Strait is a critical trade corridor not only for hydrocarbons but also for agricultural inputs such as ammonia, urea and sulphur used in fertiliser production. A meaningful share of globally traded fertiliser originates from Gulf producers including Qatar, Saudi Arabia and the United Arab Emirates, meaning disruption to regional shipping routes can quickly tighten supply and raise costs for agricultural producers worldwide.
In the United Kingdom, the economic backdrop over the past quarter has been characterised by modest growth alongside gradually easing inflationary pressures. However, developments in global commodity markets have introduced a renewed element of risk. Increasing commodity costs, particularly across energy markets, combined with potential disruption to fertiliser supply routes through the Gulf, have raised questions about whether input prices could again place upward pressure on costs later in the year. For an economy that remains a net importer of both energy and key agricultural inputs, movements in global commodity markets can feed relatively quickly into domestic production costs and consumer prices.
Recent economic data from the United States has shown tentative signs of moderation in the labour market. After an extended period of steady job creation, non-farm payroll growth has softened somewhat in recent releases while the unemployment rate has edged modestly higher, a trend visible in the latest U.S. employment data. These developments do not necessarily signal a sharp slowdown in economic activity, but they suggest that the exceptionally tight labour market conditions seen in recent years may be gradually easing.
The broader question is the duration of any disruption to global energy markets. A sustained rise in oil and gas costs would place pressure on margins in energy-intensive sectors while also eroding household purchasing power. The impact is unlikely to be uniform across regions. Economies heavily dependent on imported fuel remain particularly exposed to prolonged volatility, while those with greater domestic energy production are generally better insulated. In this respect, the United States occupies a relatively resilient position within the global energy system. Domestic production of oil and natural gas has expanded substantially over the past decade, leaving the economy less directly exposed to external supply shocks than many other advanced economies.
This contrast is particularly visible in Europe and parts of Asia, where many economies rely heavily on imported oil and liquefied natural gas. Higher fuel costs feed through quickly into manufacturing, transport and food production. Germany illustrates the challenge clearly. Much of its economic model is built around large, energy-intensive export industries including chemicals, heavy manufacturing and automotive production. When commodity and energy prices rise sharply, production costs increase while global competitiveness can weaken, placing pressure on industrial output and broader economic growth.
Japan faces a similar sensitivity to developments in global energy markets. As one of the world’s largest importers of fuel, the country remains heavily reliant on imported oil and liquefied natural gas. Movements in global energy prices therefore feed relatively quickly into domestic costs and trade balances. These dynamics come at a delicate moment for policymakers. The Bank of Japan has begun cautiously moving away from decades of ultra-loose monetary policy following its decision to end negative interest rates. A renewed rise in imported energy costs could complicate that transition by placing upward pressure on inflation while simultaneously weighing on household purchasing power and corporate margins.
In India, economic growth has remained comparatively strong relative to many other major economies, supported by domestic demand and continued investment in infrastructure and manufacturing. Large-scale infrastructure programmes and urban development projects have sustained demand for key industrial commodities such as steel, cement and energy. At the same time, India remains heavily dependent on imported fuel, with more than 80% of its crude oil requirements sourced from abroad, a dynamic reflected in recent Indian energy market analysis. Developments in global energy markets therefore have direct implications for the country’s trade balance, inflation outlook and overall economic momentum.
Sustained increases in commodity prices also raise broader questions for interest rates globally. Higher oil and gas costs tend to feed into inflation, particularly in economies reliant on imported energy. If inflation proves more persistent than expected, central banks may have less scope to reduce interest rates as quickly as markets anticipate. The result can be higher government bond yields and tighter financial conditions. For households and businesses, the impact is felt most directly through borrowing costs, from mortgages and consumer credit to business lending, which can weigh on spending, investment and overall economic activity.
Elsewhere, economic conditions remain mixed. In China, economic momentum has been uneven as policymakers continue to address structural challenges within the property sector and local government finances, developments outlined in the World Bank’s China overview. While the country remains a major consumer of raw materials, uncertainty surrounding the pace and composition of its recovery has led many investors to adopt a more cautious stance toward the region in the near term.
Taken together, these developments illustrate how geopolitical tensions, commodity markets and monetary policy are closely intertwined. Disruptions to key trade routes can push energy and agricultural input prices higher, raising production costs and influencing inflation expectations across multiple economies. Those pressures in turn shape interest-rate expectations and financial conditions. The effects are uneven: economies reliant on imported commodities—from parts of Europe to major emerging markets such as India—tend to feel the strain more acutely, while countries with larger domestic energy production may be somewhat more insulated. How long current disruptions persist, alongside how policymakers respond to the resulting inflationary pressures, may prove a defining factor for the global economic outlook in the months ahead.
Disclaimer: The views are current at the date of publication and may change. The author is an active, regulated Director and the founder of Moor Independent Financial Advisers Ltd. Moor IFA is a local, independent financial planning and investment management firm serving private clients and trustees. This guide is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.
The value of investments may go down as well as up and you may get back less than you invest. Past performance is not a reliable indicator of future performance. This article is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.
Jonathan Cotty, Chartered FCSI
