MacroVoices #529 Ole S Hansen: Commodities in The Wake of The Iran Crisis

Ole Hansen argues that the disruption from the Iran conflict extends well beyond crude oil into refined products, petrochemicals, fertilizers, metals, and agriculture, because the Middle East has expanded into energy-intensive commodity processing using abundant cheap natural gas. Front-month crude oil prices appear relatively benign and may cause observers to underestimate the depth of the disruption, with Brent December trading just above 80 dollars and WTI having dipped to 79 dollars before recovering, while the June WTI contract was trading at 92.96, up 591 basis points week over week as of April 23, 2026.

Extreme backwardation in crude oil means longer-dated prices trade significantly cheaper than spot, with approximately 12 to 12.50 dollars of backwardation between the June and December Brent contracts, implying roughly 15 percent return in six months if spot price is unchanged. Hedge funds and CTAs entered 2025 with the largest combined net short position in WTI and Brent Hansen could recall, and because they buy primarily at the front end of the curve, their positioning further amplifies front-end backwardation while their tendency to exit quickly on technical changes contributes to the 5 to 10 dollar price corrections seen in recent weeks. With hedge funds holding around 500 million barrels of oil longs, extended long liquidation could drive a short-term sell-off, though Hansen said below 80 dollars Brent there is value given the conflict will take a long time to resolve.

US crude oil production has not risen by a single barrel in the six weeks following the crisis onset, zero additional rigs have been deployed in US shale areas, and extreme backwardation discourages producers from hedging forward production because three-to-six-month prices are not attractive enough to lock in. Hansen estimates more than half a billion barrels of production has simply not been produced, tightening the global oil market significantly, and strategic petroleum reserves need to be rebuilt, adding an additional layer of demand. Tankers that left the Persian Gulf at the end of February were only just arriving at destinations at the time of the episode, meaning the biggest supply disruption was only beginning and would last at least six more weeks. JP Morgan estimates Iran can only withstand approximately two more weeks of having its crude oil exports blockaded before being forced to begin shutting in production, and once shut in, Iranian wells would take a long time and significant cost to bring back online. Once the conflict resolves, Hansen expects crude oil prices to settle at least 10 to 15 dollars higher than pre-crisis levels, with normalization taking at least two to three months.

Approximately 50 percent of sulfuric acid used by South American copper miners comes from the Middle East, creating a potential shortage risk for copper production in Chile, Peru, and Congo. Fertilizer production in the Persian Gulf relies heavily on natural gas as feedstock, and fertilizer from the Middle East arrived in the US and Europe after planting was already finished, so the near-term impact falls more on India, Africa, and later South America. Erik Townsend assessed the fertilizer deficit as near certain to result in diminished crop yields because farmers are planting under-fertilized crops during the current planting season. Wheat is nitrogen intensive while soybeans are the least fertilizer intensive of the major crops, explaining stronger price responses expected in corn and wheat. Townsend suggested a pairs trade of long December 2026 wheat versus short soybeans to express a bet on more nitrogen-dependent crops outperforming less fertilizer-dependent ones, which Hansen said could work if the thesis is purely about nutrient balance differences.

Gold found strong support at the 200-day moving average during the recent low, with the correction amounting to approximately 1,500 dollars from the January peak. Hansen expects gold to trade sideways in coming weeks before eventually moving higher, with the multi-year bull run foundation remaining intact. Townsend identified 4,685 as the critical 38.2 percent Fibonacci retracement level, warning that a close below that level suggests much more downside is possible including new cycle lows below 4,100, while Hansen said a break below the 4,500 to 4,600 area would be a concerning signal. Dollar dynamics are creating headwinds for gold, and a further geopolitical escalation could make the dollar the go-to safe haven again and trigger broad commodity liquidation.

Patrick Ceresna contended the market is underestimating how long the energy disruption will last and that the more compelling opportunity lies in deferred crude oil contracts. The trade structure he described is a bull call spread on December 2026 WTI, buying the 70 dollar call for approximately 11.70 dollars and selling the 90 dollar call for approximately 4.40 dollars, for a net debit of approximately 7.30 dollars, with a maximum profit of 12.70 dollars and breakeven near 77.30 dollars. Townsend observed that RBOB gasoline has recovered back to 52-week highs with the pullback notably shallower than WTI, and suggested the gasoline futures breakout could be a leading indicator that crude oil has more upside ahead.

Hansen believes the current commodity super cycle is approximately five years old and could last another five years or potentially longer, driven by the energy transition as a third wave due to surging electricity demand and commodity-intensive infrastructure requirements.