Israel-Iran Escalation Raises Fears for Oil Supply Disruption

Israel-Iran War

Missile Strikes Spark Fears of Regional Energy Crisis

Israel has launched multiple strikes on Iran's nuclear sites, prompting immediate retaliation from Tehran. Iran responded with missile barrages targeting Tel Aviv, marking the most severe escalation in the region in years. While oil infrastructure remains untouched for now, market analysts are alarmed by the potential spread of conflict across oil-producing territories.

Meanwhile, Israel has suspended production at two major natural gas fields and halted pipeline exports to Egypt. Oil traders reacted swiftly to the escalation, pushing Nymex WTI crude prices up 8% to $73/bl. Market participants fear that further Israeli action may extend beyond nuclear sites and into Iran's oil fields, significantly destabilizing the global oil market.

Iran’s Islamic Revolutionary Guards Corps vowed a "crushing response" after Israel's attacks decimated sections of Iran's air defenses and military command. Reports indicate damage to facilities near Isfahan. The use of ballistic missiles by Iran, which are harder to intercept than drones, has heightened global military and energy market concerns.

U.S. and Allies Brace for Broader Conflict Spillover

The U.S. National Security Council, led by President Donald Trump, convened to discuss possible measures in response to the oil price surge. U.S. forces in the Middle East are now on high alert. Former officials worry that a lack of diplomatic infrastructure could limit Washington’s ability to contain the crisis.

According to former U.S. assistant secretary of state Barbara Leaf, the conflict could spread to Iraq, the Gulf, and Egypt. She also expressed concern that Israel might pursue regime change in Iran, a move that could further destabilize the region.

The immediate leadership losses in Iran, including top military commanders, suggest the Israeli strikes were highly strategic. However, the long-term implications remain uncertain. As tensions intensify, energy markets will likely remain volatile, with risk premiums baked into every barrel traded.

The Metalnomist Commentary

The strikes between Israel and Iran mark a turning point in geopolitical risk for energy markets. The fact that oil infrastructure has been spared — for now — is cold comfort to traders and governments bracing for wider escalation. A prolonged conflict could drastically alter global oil flows, supply chains, and defense-related industrial materials.

US Strikes Escalate Middle East Tensions, Impacting Global Supply Chains

President Donald Trump

The United States has dramatically escalated the conflict in the Middle East. US forces conducted airstrikes on three Iranian nuclear facilities. President Donald Trump confirmed these strikes on Saturday evening.

Unprecedented Strikes on Key Iranian Nuclear Sites

The US action marks a significant turning point. US bombers targeted the Fordow, Natanz, and Isfahan nuclear sites. Fordow is a heavily fortified underground facility. Natanz and Isfahan are also critical to Iran's nuclear program. These facilities have faced Israeli strikes since June 13. The International Atomic Energy Agency (IAEA) had warned about potential nuclear safety hazards. It cautioned against targeting Iran's Bushehr nuclear power plant. Washington-based military experts believe only the US Air Force possesses the munitions to destroy Fordow effectively. This direct US involvement deeply impacts global supply chains.

Geopolitical Ramifications for Commodities and Shipping

The US involvement in the Israel-Iran war is a watershed moment. President Trump previously criticized US military adventures. However, he now claims eliminating Iran's nuclear program justifies US involvement. The markets are closely watching Tehran's reaction. Iran's 2.5 million b/d of crude, condensate, and products exports are immediately at stake. These exports primarily head to China. Furthermore, oil markets fear contagion. Retaliatory attacks could jeopardize shipping through the Strait of Hormuz. This choke point is vulnerable for global oil flow. Around 17 million b/d, or a quarter of seaborne oil trade, passes through it.

Rising geopolitical tensions frequently cause commodity prices to surge. Gold prices have already increased significantly. Silver and platinum have also seen gains. Supply chain disruptions are a major concern. The Middle East conflict poses risks for various industrial sectors. This includes critical minerals, vital for many industries. Therefore, instability in this region affects global trade.

The Metalnomist Commentary

The direct US involvement in strikes on Iranian nuclear facilities introduces new levels of uncertainty for global industrial supply chains. Beyond the immediate impact on oil, the long-term implications for critical mineral flows and broader logistics cannot be overstated. Businesses must now brace for potential disruptions and reassess their sourcing strategies.

Trump Sets Two-Week Deadline for US Attack on Iran

Trump & Ali Khamenei

President Trump set a two-week deadline for US attack on Iran, heightening regional tensions. He said negotiations could still change his decision. However, the warning underscored a credible threat of US military action.

Oil Market and Geopolitical Impact

Oil futures fell as markets reacted to the US attack on Iran deadline. August Brent dropped 2.7% to $76.72/bl in Asian trading. Meanwhile, traders prepared for volatility amid holiday closures. As a result, energy and shipping sectors braced for price swings.

Translating rhetoric into action remains uncertain. Trump has issued similar two-week ultimatums before without follow-through. Therefore, supply chain managers should track both political signals and market data closely.

The Metalnomist Commentary

Trump’s ultimatum illustrates how geopolitical brinkmanship can swiftly ripple through commodity markets. Stakeholders in metals and energy sectors must remain vigilant as policy decisions unfold.

Global Steel Output Declines 4.7% in September

World Steel

Global crude steel output fell by 4.7% year-on-year in September, reaching 143.6 million tons (mn t), according to data from the World Steel Association (Worldsteel). The decline was largely driven by reduced production in China, which accounts for 62% of the world’s steel output.

China’s Steel Struggles

China’s steel production dropped 6% to 77mn t in September, primarily due to weak domestic demand and multi-year lows in steel prices at the beginning of the month. While government stimulus efforts helped improve prices and production later in the month, the sharp drop in the first week outweighed the recovery. Despite this, production in October is expected to rise as steel prices continue to recover.

India: Steady but Facing Oversupply

India, the second-largest steel producer, maintained steady output compared to the previous year, driven by robust domestic demand. The country contributed nearly 10% of global steel production in September. However, as Indian mills expand capacities, there is concern about potential oversupply, with domestic demand unlikely to absorb the increased output. The festive season may temporarily boost consumption in the coming months.

Japan and Iran See Significant Declines

• Japan: Steel output fell by 5.8%, marking the seventh consecutive monthly decline. This was attributed to contracting demand from the auto and construction sectors.
• Iran: The most significant drop globally occurred in Iran, where production plummeted by over 40%. Severe power shortages hindered operations throughout most of September, although production normalized in the final week.

Outlook for Global Steel

As China’s recovery and India’s growth remain pivotal to global steel dynamics, the market faces challenges from oversupply, fluctuating demand, and economic uncertainties. October’s performance will be closely watched as producers adapt to these evolving conditions.

Energy-Related Methane Emissions Remain Flat Despite Pledges: IEA

IEA

Major Emitters Include China, Russia, US, and Iran

Energy-related methane emissions stayed flat in 2024, according to the International Energy Agency (IEA). Global emissions from the fossil fuel sector remained at 120mn tonnes, with China, Russia, the US, and Iran accounting for over 50%. The IEA attributes the lack of progress to limited national plans and weak enforcement of pledges to cut methane.

Methane Intensity Declines but Voluntary Action Lacks Verification

Although total methane emissions have not dropped, methane intensity declined slightly due to rising hydrocarbon output. However, only 5% of oil and gas emissions are subject to near-zero verified standards. The IEA notes that 30% of emissions could be cut at no net cost, but recent declines in gas prices have reduced the cost-effectiveness of abatement.

Bioenergy Leaks and Policy Gaps Undermine Progress

Methane emissions from bioenergy sources are twice as high as earlier estimates, primarily due to incomplete combustion. India alone accounts for 20% of these emissions. Additionally, the IEA highlights that only 30 countries’ climate plans specifically address methane, with just nine setting quantifiable targets. In the US, state-level laws remain despite federal rollbacks, but low gas prices weaken incentives for emissions control.

The Metalnomist Commentary

The IEA’s report reveals a critical gap between climate pledges and implementation. Without enforceable methane abatement policies and clearer investment incentives, both the fossil and bioenergy sectors risk derailing global decarbonization timelines.

The Red Sea Shipping Crisis Worsens Amid Houthi Aggression

Escalating Houthi Attacks Intensify Red Sea Shipping Crisis

In the midst of ongoing conflicts in the Middle East, the Red Sea shipping crisis has emerged as a significant issue due to increased aggression by Iran-backed Houthi rebels. This crisis exacerbates the already complex geopolitical landscape, further straining global supply chains.

According to Rob Handfield, a supply chain expert and professor at North Carolina State University, the Houthis are specifically targeting Western ships. "What they're doing is, they are targeting western ships," Handfield said. "They'll destroy a ship, or they'll force the crew to abandon ship, and this is causing real havoc."

The extent of the problem is alarming. The Houthis have attacked or threatened U.S. Navy and commercial vessels approximately 230 times, a statistic that has largely gone underreported. Handfield explained to KTRH, "It's happening so often now that they don't even keep track of it anymore, unfortunately. And what has happened is that shipping lines have just decided to completely avoid that region."

Economic Impact and Supply Chain Disruptions

The consequences of the Houthi aggression are far-reaching. The decision by shipping companies to avoid the Red Sea region has led to rising costs and severe disruptions in supply chains. For instance, the cost of a 40-foot shipping container, which was $1,600 at the end of last year, has now surged to $6,000.

The escalating costs and disruptions are a cause for concern among industry stakeholders and policymakers. Republicans have criticized the Biden administration for failing to effectively address the Houthi threat, suggesting that more decisive action is needed to protect maritime routes and ensure the stability of global trade.

Outlook and Potential Solutions

As the crisis continues to unfold, there is an urgent need for international cooperation and strategic measures to mitigate the impact on global shipping and supply chains. Enhanced security measures, diplomatic efforts, and potential military interventions are among the options being considered to stabilize the region and secure critical maritime routes.

RTX to Pay $200 Million Penalty for Export Violations

RTX

Aerospace conglomerate RTX has agreed to pay $200 million to settle civil allegations from the US State Department over the illegal export of "defense articles" to banned countries, including China, Russia, and Iran. The settlement addresses 750 claims related to "historical jurisdiction and classification errors" within compliance programs from RTX’s acquired and merged entities.

RTX disclosed these compliance issues during the integration of Rockwell Collins and Raytheon Company into RTX, according to company executives in a July earnings call. Half of the penalty will be allocated to enhancing RTX’s compliance program, and an independent monitor will oversee the company’s operations for the duration of the three-year agreement.

This settlement is part of a broader legal strategy for RTX, which anticipates resolving three major legal issues with total payments exceeding $1 billion.