Commodities Update April 2026
Commodity markets experienced mixed trends in March amid the Gulf of Arabia conflict, with crude oil volatile but ending the month where it started, LNG rising sharply, and metals showing varied performance. The report anticipates significant impacts on prices and supply through 2026 and beyond due to ongoing geopolitical tensions.
The following is based on text from the April Market Outlook (PDF 3MB)
For more details of our longer-term forecasts see April Commodity Forecasts
Commodities had a mixed March as the conflict in the Gulf of Arabia unfolded. Our overall index is down 2.5% since our March report. Crude oil retraced to around US$94/bbl, broadly unchanged over the month, while Asian LNG rose a further 9%. Aluminium and metallurgical coal gained 4% and 5%, respectively. In contrast, gold fell 7%, while iron ore was flat at US$107/t. Since the last report, we have shifted to a more severe conflict scenario, assuming a two‑month blockage of the Strait of Hormuz. Under this assumption, we now expect Brent to average US$105/bbl in the June quarter, before easing back to around US$80/bbl by year end.
Oil prices eases but risks skewed to upside
A fragile ceasefire in the Middle East has reduced immediate escalation risks but uncertainty remains high. While there have been steps towards a renewed US–Iran dialogue, progress has been tentative and limited to date. Intermittent vessel transits through the Strait of Hormuz fall well short of restoring the roughly 20mbpd of crude flows that existed pre‑conflict. Supply conditions remain tight due to production shut‑ins, infrastructure damage and ongoing shipping dislocation, with many vessels continuing to avoid the Strait, creating persistent logistical backlogs. Although global inventories (~8.4bn barrels) provide some buffer, draws outside the Gulf, around 200mb in March, highlight growing downstream stress.
Our baseline assumes the Strait remains largely closed through April, followed by only partial reopening. We expect throughput to recover to around 20% of normal capacity by May, with flows normalising towards end‑2026 as security and insurance risks linger. Brent prices are now expected to average around US$105/bbl in Q2 2026, around 33% above our March forecast, before easing as geopolitical risks unwind and high prices drive demand destruction. Dated Brent briefly reached US$145/bbl in early April and our economic modelling places greater weight on this physical crude price rather than financial market pricing. As such, we have trimmed our Q2 estimates to be more in line with financial market pricing, and instead capture more of the economic impact of tighter conditions through wider refining margins, particularly for diesel and jet fuel. Brent is forecast to ease to US$80/bbl by Q4 2026, with further moderation through early 2028 as supply and shipping conditions normalise.
LNG supply constraints boosting Asian prices
LNG markets remain acutely exposed to the conflict, with an estimated 300mcm/day - around one‑fifth of global supply - lost from Qatar and the UAE. Ras Laffan in Qatar, the world’s largest LNG export complex, has been offline since early March, while global storage levels were already depleted coming out of the Northern Hemisphere heating season. Asia is particularly vulnerable, with an estimated 80–90% of LNG volumes transiting the Strait of Hormuz destined for Asian markets, driving sharp increases in Japanese LNG prices. We continue to expect Japanese LNG prices to peak around US$24/mmbtu in the September quarter and while prices remain elevated into the December quarter they are expected to ease back to just above US$20/mmbtu. Given the scale of infrastructure damage and the lack of viable alternative export routes, LNG prices are not expected to return to the pre-conflict level until mid-2027.
Iron ore: support now, surplus ahead
Iron ore continues to find near term support from higher freight and operating costs related to the energy shock, with freight accounting for an estimated 15–30% of delivered costs. It has also been supported by resilient steel output in China. The medium‑term outlook is increasingly challenged, however, with surplus conditions expected to emerge. Supply side pressures are building, led by new low‑cost supply from Simandou and historically high iron ore inventories at Chinese ports.
At the same time, global steel demand is softening as major economies face energy-related cost pressures. Increased use of steel scrap and a structural decline in Chinese steel production continue to erode underlying demand, with growth in India and South‑East Asia providing only a partial offset.
Adding to the downside risk, a resolution of industrial tensions between China Mineral Resources Group and BHP has also removed a source of temporary support. Together, these dynamics point to rising downside risk over the medium term so we continue to expect the 62%fe index to soften, averaging around US$101/t in the June quarter, before declining further to approximately US$84/t by December.
Gold consolidating before a push
Gold has been under pressure in recent weeks as markets focused on the inflationary impact of higher oil prices and the prospect that central banks may keep policy tighter for longer. A rapid rise in US real yields alongside renewed USD strength has weighed on bullion, prompting a notable retracement from the all-time high reached in late January.
We expect consolidation to persist over coming weeks. Gold has already corrected materially, and speculative positioning has been flushed out. A period of range trading, with easing volatility, should allow a base to form and encourage longer‑term investors to gradually rebuild positions.
Geopolitical risks tend to have an uneven and often short lived impact on gold, with near term safe haven rallies typically fading as markets adjust. More durable support usually comes through second round effects, including shifts in the growth inflation mix, policy responses and strengthening strategic demand as investors diversify. If geopolitical disruptions persist and energy prices remain elevated, the combination of higher inflation and weaker growth, alongside the risk of renewed fiscal and monetary stimulus, would present upside risks for gold. Persistent geopolitical uncertainty also underpins overall demand.
Concerns about central bank selling resurfaced following recent price weakness and headlines around Turkey. While some central banks may sell modest amounts at times, there is little evidence of a structural shift away from gold. We continue to expect official sector net purchases to be broadly in line with recent trends.
Headline risks remain as markets re‑price geopolitical and macro developments. Nevertheless, positioning is cleaner, long term investors remain under invested, and diversification demand is rising so we expect to see a new high in gold.
The Gulf conflict lifts near-term aluminium and thermal coal
After oil and gas, thermal coal and aluminium are the commodities most directly affected by the Gulf of Arabia conflict. Thermal coal prices are being boosted by potential gas-to-coal switching for power generation. Aluminium prices are being supported by supply disruptions in Gulf production and higher energy costs. Uncertainty remains over how long the conflict will last and, critically, whether the Strait of Hormuz stays closed to shipping. Under our base case, a higher energy risk premium is likely to persist in the near term, supporting both coal and aluminium prices.
Thermal coal being supported by the shortage of gas in Asia
We have lifted our 2026 thermal coal price forecast to US$125/t, with prices peaking at US$145/t in the June quarter. Since the Iran conflict started on 28-Feb, European gas is up close to 50% and Brent is up around 30%, while thermal coal has risen about 15%. Our current scenario has Brent at US$105/bbl in the June quarter. However, the dated/delivered price for physical crude is likely to remain meaningfully above futures. These higher physical prices will continue to flow through to LNG and thermal coal. Based on current spot gas prices in Europe and Asia, the implied thermal coal price would be more than US$250/t.
While we do not expect widespread short-term gas-to-coal switching, higher gas prices should still support thermal coal prices. If energy prices remain elevated for a more protracted period, that would also be supportive of higher thermal coal demand. Material production curtailments in Indonesia would be a further upside risk, although this appears unlikely at this stage. Over the medium to longer term, we continue to expect a structural shift away from thermal coal, with declining demand and prices easing back towards US$120/t by end-2027.
Aluminium supply squeezed by Gulf disruptions
Aluminium markets are facing mounting supply pressures from elevated energy input costs and disruptions to Gulf-based smelting capacity. Often described as ‘solid electricity’, aluminium production is highly energy-intensive, with higher power prices feeding directly into marginal production costs. Compounding this, the Gulf region accounts for around 9% of global smelting capacity, much of which is geographically constrained within the Arabian Gulf. In addition to logistical disruption, physical damage to smelting facilities in Qatar and Bahrain has resulted in outright supply losses, while the time and capital-intensive nature of smelter restarts limits the scope for a rapid recovery in capacity. Against this backdrop, we expect aluminium prices to spike in the March quarter of 2027, averaging US$4,000/t, before moderating as supply conditions gradually stabilise.
Copper demand electrified
Copper prices strengthened on growing optimism that the Middle East conflict may be approaching an end, alongside renewed momentum behind global electrification trends. At the same time, global copper inventories have tightened, with COMEX data pointing to ongoing drawdowns through March and into April. Part of this tightening is likely linked to sulphur shortages, with around one-third of global sulphur supply sourced from the Gulf, and China at the same time curtailing sulphuric acid exports. Given sulphuric acid’s critical role in copper production, particularly in Chile, Peru and the Democratic Republic of the Congo, these constraints are weighing on refined supply. As a result, copper prices have returned above US$13,000/t, with a local peak expected in the March quarter of 2027 averaging US$13,350/t, before further gains later in the forecast period as net‑zero targets approach and data‑centre build‑outs accelerate.
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