If the Iran war lasts for a long time, it will be far more than just a matter of oil prices soaring.

Iran war enters a stalemate. The market’s biggest fear isn’t just a day or two of intense fighting, but the potential for supply, logistics, inventories, and financial pricing to become distorted after two quarters or even longer. Bank of America, in a research report, first breaks down the political scenarios into several different durations, then considers oil, gas, refined products, coal, chemicals, fertilizers, agricultural products, and metals one by one within the same “war duration—supply-demand gap—price/volatility” framework.

According to Chase Wind Trading, Francisco Blanch, a strategist for global commodities and derivatives at BoA, believes that the probabilities of “regime hardening” and “rapid end” are now roughly equal. Previously considered possible paths like “regime transition” (Venezuela-style peaceful transition, Libya/Syria-style chaos) are almost out of the picture.

On the energy front, BoA views the Strait of Hormuz as a “main switch”: once the strait reopens, many prices could fall back; if reopening is slow, even if oil fields and refineries are not permanently destroyed, crude and refined products will be repriced with higher risk premiums. Under a new baseline scenario, Brent crude oil averages about $77.50 per barrel in 2026, with peaks possibly exceeding $240. The European TTF natural gas price range is projected between €40 and €150 per MWh.

More importantly, this report does not confine shocks solely to oil and gas. Fertilizer (urea) is seen as the first break in the agricultural supply chain, aluminum as the metal most resembling a “supply shock,” and sulfur (transported via Hormuz) could extend the geopolitical conflict into longer industrial shortages through African copper belts and Indonesian nickel industries. On the trading side, BoA believes there are at least three “undervalued” areas: distant futures contracts, cross-commodity relative values, and structural changes in correlations and volatility.

Oil prices from $77.5 to $240: each additional week of delay doubles the complexity

BoA categorizes scenarios into four: quick resolution, conflict extending into Q2, into Q3, and impacting the entire second half of 2026. Corresponding to an average Brent price in 2026 roughly at $70, $85, $100, and $130 per barrel, with a peak hint at $240 in the most extreme case.

They set the 2026 “new median baseline” at $77.50 per barrel: in the first half of 2026, a supply-demand gap of about 1.1 million barrels per day occurs, then supply recovers in the second half, returning to surplus. Two key assumptions are: (1) energy assets do not suffer permanent damage exceeding 12 months; (2) after the war ends, Hormuz transit can quickly resume within days. The report admits these assumptions may be optimistic—this is why the risk range is quite broad.

Another notable detail is that the report notes WTI distant futures are less responsive to war, with the spot discount curve deepening, indicating a more pronounced contango. It suggests U.S. shale oil is more sensitive to the “12-month forward WTI,” which has risen from about $56 to around $67 since the start of the year, potentially triggering more drilling and production responses, but this is not an immediate buffer to fill the Middle East gap.

Refined product markets are even more affected than crude oil because there are no strategic reserves for gasoline or diesel. NYMEX heating oil crack spreads once surged to $73 per barrel—the highest since the Russia-Ukraine conflict—then fell back to $59. BoA expects the 2026 average crack spread for gasoil to reach $30 per barrel, higher than the $22 average in 2025.

What primarily determines the price ceiling is the speed of Hormuz reopening

The baseline fact in the report is that the Strait of Hormuz accounts for about 20 million barrels per day of crude and refined product transit, with roughly 70% crude and 30% refined products. When the strait is “almost shut down,” the issue isn’t just “whether there is oil,” but “whether oil can get out.”

The capacity of alternative routes is clearly outlined: Saudi Arabia’s east-west pipelines to Yanbu can handle about 5 million barrels per day; Abu Dhabi’s crude pipeline to Fujairah about 1.5 million barrels per day; Iraq’s Kirkuk-Ceyhan pipeline nominally 1.2 million barrels per day, but in the short term possibly only an extra 250,000 barrels per day. As a result, BoA estimates that announced or potential OPEC+ production cuts could exceed 10 million barrels per day, and if Hormuz remains blocked, cuts could be even higher.

This explains BoA’s cautious stance on OPEC+ production increases: on March 1, OPEC+ agreed to restore a monthly increase of 206,000 barrels per day, but the report questions whether these increments can actually reach the global market if Hormuz remains constrained.

Aluminum: Middle East supply gap forming, LME warehouses nearing depletion

Middle East accounts for about 9% of global aluminum supply, mainly from EGA (around 2.68 million tons/year), Alba (about 1.62 million tons/year), and Qatalum (630,000 tons/year). According to Norway’s Hydro on March 3, Qatalum has been under controlled shutdown, operating at about 60% capacity, with no definite restart date, and has issued force majeure notices to customers. Aluminum Bahrain (Alba) also declared force majeure on supply contracts.

Shutting down aluminum smelters is rare because restarting is extremely costly—electrolytic cells freeze and require complete rebuilds. Even if a ceasefire is signed tomorrow, the impact of Qatalum’s cutback won’t disappear immediately.

BoA’s quick resolution scenario forecasts a 1.2 million-ton deficit in aluminum, with an average price of $3,163 per ton; if the conflict extends into the end of the year, deficits could reach 5 million tons, with prices possibly hitting $4,000 per ton, and in extreme scenarios surpassing $5,000. Currently, LME aluminum warehouse stocks are near historic lows, with about half of existing inventories originating from Russia, not the preferred delivery for Western buyers. The U.S. has imposed a 50% tariff on aluminum, and both Europe and the U.S. are net importers, intensifying competition for limited supplies.

Copper and zinc: Sulfur supply disruptions are slow-moving crises

Middle East (mainly Saudi Arabia, Qatar, Iran) contributes about 38% of global sulfur shipping. Sulfur is converted into sulfuric acid, used in hydrometallurgical copper extraction (SX-EW).

African Copperbelt imports about 2 million tons of sulfur annually from the Middle East, converting it locally into sulfuric acid for roughly 1.5 million tons of copper—about 3% of global supply. But this isn’t an immediate crisis: converting sulfur into acid takes time, and producers typically hold 2-3 months of inventories. If the blockade lasts more than two or three months, African copper production will begin to face real impact.

BoA’s baseline forecast for copper in 2026 shows a deficit of 453,000 tons, with an average price of $13,187 per ton (about $5.98 per pound). If African copper production is reduced year-round due to sulfur shortages, the deficit could grow to about 1.4 million tons, supporting copper prices to rise roughly 40%. For zinc, Iran’s Mehdiabad mine supplies about 100,000 tons of concentrate annually to Chinese smelters, now at risk. However, BoA emphasizes that sustained high oil prices will exert a noticeable demand suppression on metals—supply and demand pressures are moving in opposite directions, adding uncertainty to the trend.

Europe’s natural gas pressure point: about 20% of global LNG stuck at Hormuz

The Hormuz blockade affects roughly 20% of global LNG supply, with Qatar and UAE LNG nearly halted. Europe’s situation is more fragile than in 2022: back then, Russian pipeline gas was declining gradually, giving time to respond; now, supply is cut off abruptly. European natural gas inventories are near the lows of 2022.

BoA estimates that each month of Qatar and UAE supply disruption consumes about 10% of Europe’s gas storage. If disruptions last for 10 weeks, TTF prices in Q1 2027 could surpass the 2022 record highs. Under such circumstances, Europe might have to restart imports via Yamal or Ukrainian pipelines from Russia.

Qatar has delayed its next expansion project from late 2026 to 2027. Under the baseline scenario (5-6 weeks of disruption), TTF prices in 2026 average around €50 per MWh; if the conflict drags into Q2, prices could rise to €60, with peaks possibly reaching €150; in the worst case throughout the year, prices could reach €150, with peaks even at €500.

Chemical raw materials and coal: substitution chains will spread the impact

In NGL and petrochemical sectors, the report highlights two ratios: about 37% of marine naphtha and 24% of marine LPG transit Hormuz last year. Disruption of Middle Eastern raw materials will make it harder for Asia and Europe to fill the gap, potentially forcing cracking units to reduce load or shut down. The beneficiaries are U.S. petrochemical systems—relying on domestic NGL supply and not crossing key maritime routes. BoA estimates that if Hormuz remains restricted long-term and U.S. crackers run at full capacity, U.S. ethane demand could increase by up to 400,000 barrels per day.

On coal, it’s a typical “gas-to-coal” switch. Cost comparisons show: Newcastle thermal coal at about $130/ton makes coal-fired power significantly cheaper; only when prices reach around $130/ton does coal power become clearly more economical; at about $300/ton, coal and gas are near parity. As a result, Asian power grids will prefer coal during LNG shortages, and Europe under low inventories and energy security concerns may also see a pragmatic shift back. BoA revises Newcastle thermal coal’s 2026 average price from pre-conflict $123/ton to $150/ton, with risks of rising to $200/ton or even approaching 2022 record highs under prolonged conflict.

Agriculture: Urea is the first to break, and this time the scale is much larger than in 2022

The report’s focus on agriculture isn’t on grain prices themselves but on input costs. It notes that since the war, agricultural products overall have risen, but urea prices have surged 30–40% in various regions, outpacing grains and oilseeds. Two reasons: (1) the Gulf region accounts for about one-third of global urea exports, which must pass through Hormuz; (2) nitrogen fertilizer production is highly sensitive to natural gas, which accounts for 60–80% of ammonia/urea chain costs.

The report describes this fertilizer shock as a “systemic risk” greater than in 2022: global urea supply is highly concentrated, with China, India, and the Middle East together accounting for about 65–70% of global supply, and these regions are intertwined with Gulf LNG supply. Spillover effects include: India and Pakistan beginning to cut production due to Qatar gas issues; Turkey banning urea exports from stockpiles; Europe’s Agrofert reducing ammonia output at Slovak Duslo and German SKW Piesteritz due to soaring energy prices.

Regarding grain prices, BoA considers corn the most “vulnerable”: it previously projected U.S. spring planting acreage could fall from 98.8 million acres to about 95 million acres, reducing U.S. yields by 20–25 million tons. Further nitrogen shortages could force other countries to cut yields, with BoA even modeling U.S. corn exports reaching 90–95 million tons in 2026/27, and U.S. stocks-to-use ratio dropping to about 8.7%, potentially pushing corn prices above $6 per bushel.

The report also views wheat as a “food security hedge,” and soybean oil as more directly driven by energy prices due to biodiesel attributes; transportation fuel costs are also highlighted—U.S. trucking index surged nearly 30% post-war, and shipping costs rose 6–8%.

BoA raises its 2026 forecasts for key agricultural commodities: wheat from $5.3 to $6.5 per bushel, corn from $4.4 to $5.3, soybeans from $10.4 to $11.9, and soybean oil from 49 cents to 65 cents per pound. If the conflict extends into Q3, corn could approach $7, wheat $8.

Gold: Scenario 2 is the most painful; scenarios 3 and 4 are the basis for bullish confidence

BoA maintains a 12-month target price for gold at $6,000 per ounce, but different war scenarios imply very different implications for gold.

Scenario 2 (conflict extending into Q2) currently appears most likely and is the most challenging for gold. The U.S. economy is neither too hot nor too cold: growth is expected at 2–2.5% (below the previous 2.8%), and inflation may still be around 3% at year-end. This makes it difficult for the Fed to cut rates, directly weakening gold’s primary upward driver. The rate market has shifted from pricing rate cuts to pricing hikes.

Scenarios 3 and 4 (extending into Q3 or the whole year) are the real bullish cases for gold: high inflation combined with economic stagnation, forcing the Fed to start cutting rates before inflation peaks. Historically, the “misery index” (unemployment rate + CPI) correlates strongly with gold, and in these scenarios, BoA forecasts gold could break through $6,000 to $6,500 per ounce.

As for Kevin Warsh potentially becoming Fed Chair and triggering a gold adjustment, BoA sees no clear shorting logic—most investors expect Warsh’s appointment to lead to a weaker dollar and higher Treasury yields, and historically, a weaker dollar has not been associated with sustained declines in gold.

Three underpriced factors to watch

Current implied volatility for oil and aluminum over three months is already 2–4 standard deviations above historical averages, but one-year volatility remains near historical mean. This suggests market expectations of conflict are short-term. BoA sees value in buying longer-dated volatility, especially in Brent options, and in soybean oil and corn longer-term options—since fertilizer shortages’ impact on agricultural supply takes time to manifest in prices, affecting longer-term contracts more.

In relative value, European energy has more upside than U.S. (Brent vs. WTI), because U.S. SPR oil is entering the market. Aluminum supply shocks are more direct than copper’s and may outperform copper. Soybean oil’s biofuel properties make it more sensitive to energy prices, and the soybean-to-corn price ratio may narrow.

However, a critical turning point is if oil prices break above $160 per barrel, likely triggering a global recession, which would cause metals prices to plummet. Historical episodes in 1973–75 and 1990 show that high energy prices eventually crush demand, with energy prices being the most resilient, and metals and grains collapsing first. If this conflict drives oil above that level, commodity divergence will become much more intense than it is now.

Risk warnings and disclaimers

Market risks exist; investments should be cautious. This document does not constitute personal investment advice and does not consider individual user’s specific investment goals, financial situation, or needs. Users should determine whether any opinions, views, or conclusions herein are suitable for their circumstances. Investment is at your own risk.