Commodity wrap: As the US-Israel-Iran war showed no signs of relenting, even on its 14th day, crude oil prices skyrocketed amid the continued closure of the Strait of Hormuz
From boiling crude prices to a cool-down in the “safe-haven” metal gold, here is everything that went down with commodities this week.
Crude oil
In the international market, Brent Crude oil futures rallied as much as 2.28% to an intraday high of $102.75 per barrel on Friday, March 13. The contract continued trading around the $100 per barrel mark throughout the day as Iran’s new supreme leader, Mojtaba Khamenei, said that the Strait of Hormuz will remain closed, amid the waging war in West Asia.
Over the week, the Brent Crude has soared over 11%, amid reports that Iran struck multiple civilian tankers and cargo vessels, which sent oil prices surging.
In the week prior, Brent Crude oil prices had advanced to a 52-week high of $119.50 per barrel, before cooling slightly on Monday, March 9. However, the prices surged again, as the almost two-week-long war showed no signs of de-escalation.
In a bid to cool the boiling global crude prices, the US, as per multiple media reports on Friday, has granted countries a 30-day waiver to purchase sanctioned Russian oil and products currently stranded at sea. The US had granted a similar waiver to India to purchase Russian oil earlier this week.
Domestically, on the Multi-Commodity Exchange (MCX), crude oil contracts for April delivery advanced as much as 3.41% to an intraday high of ₹9,033 per barrel. It had skyrocketed to a lifetime high of ₹10,177 per barrel on Monday. The contract has gained more than 8% over the week.
Aluminium
This week, benchmark three-month aluminium contracts on the LME neared their four-year high levels, as the Middle East conflict led to the closure of the Strait of Hormuz, which is also responsible for supplying about 9% of global aluminium output.
On the MCX, aluminium futures for expiry in April have gained more than 2% over the week.
In the week prior, two major aluminium smelters in the Middle East, including Qatar’s Qatalum and Bahrain’s Alba, were forced to suspend deliveries amid a barrage of attacks by Iran. As per ING THINK, the Gulf Cooperation Council (GCC) supplies 8% of the world’s aluminium.
China, the world’s largest aluminium producer, has capped its smelting capacity at 45 million, which has limited further output growth and choked supply.
Gold
Globally, COMEX gold for April delivery declined as much as 2.19% to hit an intraday low of $5,014.10 per ounce. Over the week, the contract slumped by nearly 3%, marking its second consecutive weekly fall. On the MCX, gold futures have also slipped about 2% over the week.
While the yellow metal rallied initially when the war in West Asia began on February 28, it has since given up on its early gains, as surging crude oil prices led investors to fear prolonged inflation.
Prolonged inflation might lead to the US Federal Reserve having a more hawkish policy stance, as per media reports. Higher interest rates increase the appeal of yielding assets, instead of non-yielding assets like gold.
The dollar index, which measures the greenback’s strength against a basket of six currencies, was trading 0.61% higher at 100.35.