Wall Street Sounds the Alarm: A Commodity Storm Is Coming!

Transport efficiency is steadily improving—so a single ‘bottle cap’ of inventory can now cover an ever-growing number of ‘bottles.’ Yet chronic underinvestment, declining ore grades, and persistent supply deficits have repeatedly become mere pretexts for financial institutions to speculate—without translating into real investment for capacity expansion. Global tech companies are pouring massive capital into physical infrastructure: data centers, computing clusters, grid upgrades, and energy storage systems—all demanding enormous volumes of industrial metals… Physical commodity inventories can only dwindle further amid a structural deficit where consumption consistently outstrips supply. As the lyrics go: ‘Living like this for 30 years—until the skyscraper collapses!’ Today, deglobalization is accelerating; geopolitical wars detonate bombs; and climate anomalies pour fuel on the fire—all jointly incubating a massive commodity storm! Deglobalization is accelerating: In the era of globalization, production followed the lowest resource costs; shipments flowed to wherever demand was greatest; and inventories were shared globally—surplus regions supplied shortages elsewhere. The world relied on low-cost cross-border logistics, free trade, and multinational investment to smooth over supply gaps and suppress commodity prices. Now, trade barriers and export controls have made localization of critical minerals the norm. The U.S., Europe, China, and Japan have all formulated their own national critical mineral strategies—security, controllability, and self-reliance have replaced efficiency as top priorities. Policy uncertainty across countries has risen sharply: Western nations have seized Russian assets and repeatedly used pretexts to confiscate Chinese investments. Mining and oil companies hesitate to commit large-scale, long-term capital expenditures—and approach cross-border investment with extreme caution. Insufficient new capacity means inadequate buffers, rendering markets increasingly sensitive: even minor shocks trigger violent price swings. Supply chains are being forcibly restructured with built-in redundancy—pushing up costs across the entire value chain and increasing demand for physical commodities. Meanwhile, the African Union plans to establish a mineral resources alliance; four Latin American countries aim to form a copper–lithium resource alliance; and multiple nations are simultaneously implementing policies such as mandatory state equity stakes, bans on raw mineral exports, and quota reductions—raising red flags repeatedly over the stable supply of physical resources! Geopolitical wars detonate bombs: If deglobalization is a slow knife—gradually eroding supply resilience while boosting physical demand—geopolitical conflict is the fuse that directly triggers ‘black swan’ explosions disrupting production and transportation. A U.S.–Iran war would seal off the Strait of Hormuz—not only the world’s energy chokepoint, controlling 25% of global seaborne oil trade and 20% of global LNG trade, but also the linchpin for 32% of global ammonia supply, 33% of global urea seaborne trade, 45% of global sulfur exports, 31–45% of global seaborne methanol trade, 25% of global polyethylene/polypropylene trade, 50% of global DAP/compound fertilizer trade, 30% of global naphtha trade, and 11.8% of global aluminum electrolysis… fundamentally altering the supply–demand balance for numerous commodities! Moreover, the ‘splash damage’ from these ‘black swan bombs’ is immense. Houthi forces in Yemen have blockaded Saudi Arabia in the Red Sea; the Russia–Ukraine war has also shifted tactics—Ukraine uses long-range drones to strike Russian refineries and logistics hubs, while Russia blocks Ukrainian ports, halting grain exports. Refineries in the Middle East and Ukraine continue to be bombed, straining global refining capacity and sending refined product margins soaring! Goldman Sachs estimates that current global refinery shutdowns exceed seasonal averages by 60%. The American Petroleum Institute estimates that global daily crude processing capacity has declined by roughly 5 million barrels—about 5% of total global refining capacity.

The Strait of Hormuz Under Fire: How Middle Eastern War Is Reshaping the Global Petrochemical Landscape

The International Energy Agency (IEA) notes that, since the outbreak of hostilities on February 28, benchmark oil prices surged by $20 per barrel to $92—and at one point nearly touched $120 per barrel. And that’s just crude oil. The IEA explicitly states that refined product markets have surged even more sharply—especially diesel and jet fuel—because the Middle East supplies not only crude oil but also vast quantities of refined products. Shipping costs have further amplified this shock. In its March 26 analysis, the U.S. Energy Information Administration (EIA) wrote that VLCC (Very Large Crude Carrier) freight rates from the Middle East to Asia hit a record high in March 2026—the highest since records began in November 2005. What’s driving this freight-rate surge isn’t just the physical risk along the route, but also skyrocketing war-risk insurance premiums. For refiners and petrochemical firms, this means cost pressures stem not only from paying more for each barrel of oil purchased—but also from higher, slower, and more uncertain costs to get that oil delivered to the plant gate. This has created a frequently misunderstood situation in the refining industry: high crude prices do not automatically translate into high profits. The IEA estimates that Gulf countries exported an average of 3.3 million barrels per day (bpd) of refined products and 1.5 million bpd of LPG in 2025—but hostilities have already idled over 3 million bpd of refining capacity, with another 4 million bpd at risk. This means refiners face not a simple ‘crude up, products up more’ crack-spread story—but simultaneous constraints on feedstock supply, unit operations, storage turnover, and outbound logistics. The IEA specifically highlights diesel and jet fuel markets as most vulnerable, because other regions cannot quickly or fully replace the Middle East’s supply shortfall. The petrochemical sector faces even more direct—and more contagious—impacts. The IEA explicitly writes: ‘The sharp drop in LPG and naphtha supply has already forced petrochemical plants to cut polymer output.’ This statement carries significant weight—it signals that the impact has already propagated beyond energy markets into industrial materials markets. The Gulf region doesn’t just export oil; it also exports cracking feedstocks and petrochemical intermediates. Once LPG, naphtha, and related logistics are disrupted, the entire ethylene, propylene, polyethylene, and polypropylene value chains must operate at reduced loads. The IEA also points out that the Strait of Hormuz handles over 30% of global urea trade, roughly 20% of global ammonia and phosphate fertilizer trade, and about half of global seaborne sulfur trade. This means the war doesn’t merely inflate plastic and chemical feedstock costs—it also affects agriculture, metal smelting, and broader industrial supply chains via fertilizers and sulfur. Regional divergence is equally clear. The EIA estimates that, in the first half of 2025, 89% of crude oil and condensate shipped through the Strait of Hormuz went to Asian markets—with China, India, Japan, and South Korea collectively accounting for 74%. The IEA’s LNG assessment is similar: nearly 90% of LNG exported via the Strait of Hormuz flows to Asia—equivalent to over one-quarter of Asia’s total LNG imports. Thus, although the war erupted in the Middle East, its most immediate blow falls squarely on Asia’s refining and petrochemical systems—particularly those economies highly dependent on Middle Eastern crude oil, LPG, naphtha, and LNG. The OECD also cautions that in Asian economies such as Japan and South Korea, net energy imports typically account for over 80% of domestic energy consumption—making them especially vulnerable to Middle Eastern supply disruptions. Macroeconomic costs are now emerging.

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