Force majeure declarations are beginning to ripple across the global commodities sector as the escalating conflict in the Middle East threatens to spread shocks beyond oil and gas.
Energy companies, producers, and traders are already grappling with interruptions to shipments through the Strait of Hormuz, the narrow waterway linking the Persian Gulf to global markets.
The strait typically carries roughly one-fifth of the world’s oil and liquefied natural gas supply, making it one of the most important chokepoints in global commodity trade.
Energy producers declare force majeure
Some of the first force majeure declarations have emerged from the energy sector.
QatarEnergy declared force majeure on liquefied natural gas (LNG) deliveries this week after attacks forced the state-owned company to halt production at key facilities. The decision followed strikes on two LNG installations and continuing security threats in the region.
In Israel, Chevron (NYSE:CVX) also declared force majeure at the Leviathan offshore gas field after authorities ordered a shutdown following US–Israeli strikes on Iran and subsequent retaliation across the region.
Leviathan is Israel’s largest gas field and supplies natural gas to Israel, Egypt and Jordan. The suspension marks the second time in less than a year that regional hostilities have interrupted operations at the site.
Meanwhile, oil producers in the Gulf have begun cutting output as tankers struggle to move through Hormuz. The United Arab Emirates (UAE) and Kuwait have both started reducing production after storage facilities began filling up when exports could not leave the region.
Aluminum, precious metals markets feel the shock
Aluminium Bahrain BSC has invoked force majeure on some shipments after maritime traffic through Hormuz effectively stalled. The company said the measure was tied to transit disruptions rather than damage to its smelter operations.
The announcement sent aluminum prices sharply higher. Futures in London surged to their highest level since 2022, rising as much as 5.1 percent during trading before settling higher on the day.
The aluminum market is particularly sensitive to supply disruptions because the metal is used across a wide range of industries, including automotive manufacturing, construction, appliances and packaging. Even short interruptions can create shortages for manufacturers that rely on tightly timed deliveries of specialized metal products.
Mining financier Robert Friedland, founder of Ivanhoe Mines (TSX:IVN,OTCQX:IVPAF), warned that the broader consequences of a prolonged closure of the Strait of Hormuz could extend far beyond the Gulf region.
“Further to what we said about the impact that the closing of the Strait of Hormuz has on the sulphur market… and therefore African copper production… Craig Tindale maps out that this is only one small piece of a giant and critically important 3D jigsaw,” Friedland wrote on X.
“Everything affects everything, everywhere, all of the time.”
Meanwhile, precious metals markets are also feeling the effects of the conflict. Air traffic across much of the Gulf region has been curtailed since US and Israeli strikes on Iran began earlier this week, halting most flights in and out of Dubai.
Dubai, one of the world’s most important hubs for bullion logistics, handled roughly 20 percent of global gold shipments last year, serving as a key transit point for metal moving from Africa and Europe to Asian markets.
With flights grounded, traders say shipments of gold and silver have stalled across several trading centers.
“Gold availability has become a concern following the suspension of flights from the Middle East,” said John Reade, senior market strategist at the World Gold Council (WGC).
Some traders say prolonged disruptions could increase volatility in precious metals markets that have already seen sharp price swings this year. Gold recently surged to record levels above US$5,400 per ounce amid geopolitical tensions before easing slightly this week.
Even after the pullback, prices remain nearly 20 percent higher since the start of the year.
Geopolitical turmoil drive metals market swings
Jeffrey Christian, managing partner at CPM Group, said geopolitical instability has been a major driver of investor demand for gold and silver.
“That has caused investors to buy more gold and silver than ever before.”
Christian added that high prices and volatility can also create bottlenecks in the physical metals market.
“You have to understand that with the high prices and the high volatility, that really puts a constraint… on the flow of physical metal through the market,” he said.
For now, the biggest question facing commodity markets is how long disruptions in the Persian Gulf will last.
The Strait of Hormuz remains effectively closed to most commercial shipping, leaving hundreds of oil and gas tankers anchored outside the passage while governments consider military escorts to reopen the route.
Securities Disclosure: I, Giann Liguid, hold no direct investment interest in any company mentioned in this article.