Is the "rotation" of commodities beginning? After gold, crude oil faces a major test

During the Spring Festival holiday, influenced by the US-Iran conflict, international oil prices performed strongly. The market generally believes that once geopolitical disturbances subside, oil prices are likely to return to a downward trend under supply pressures. The widespread bearish sentiment towards “the king of commodities” contradicts the generally optimistic outlook for commodities in 2026, as crude oil has a significant impact on energy chemicals and many agricultural products. Many investors, optimistic about commodity trends in 2026, have recently invested in oil and gas, chemical products, or stocks. The question of “whether oil prices can stay firm if geopolitical tensions ease” has become a key focus.

Continued Tensions in Geopolitical Situations

Recently, tensions in the Middle East have persisted. According to Israeli media reports, 11 US F-22 fighter jets arrived at a southern air force base in Israel on the 24th. The day before, the US Navy’s USS Ford aircraft carrier appeared in the eastern Mediterranean near Crete for replenishment, indicating that the US is close to completing a “dual aircraft carrier” deployment in the Middle East.

A new round of US-Iran negotiations is scheduled for the 26th in Geneva, Switzerland. Meanwhile, media reports suggest US President Trump may consider conducting a “limited strike” on Iran first, then escalating military actions based on the situation.

According to Xinhua News Agency, regarding US military actions against Iran, William Wexler, senior director of the Middle East program at the Atlantic Council think tank, analyzed three possible attack modes:

1. “Limited strikes” targeting key military and security targets, including the Iranian Islamic Revolutionary Guard Corps and critical infrastructure, to establish deterrence.

2. “Long-term weakening” involving periodic strikes on Iran’s nuclear facilities, missile, and drone systems, to gradually diminish Iran’s military capabilities.

3. “Regime removal” targeting Iran’s leadership and paralyzing command systems. However, analysts point out that the US currently lacks special forces support in the region, and Tehran’s inland location makes it difficult for the US to replicate the early-year raid in Venezuela.

Experts believe the US may gradually escalate military actions or combine these strike methods. Iran’s stance in negotiations and its response to strikes could be crucial in determining the conflict’s direction. Iran has made it clear that “there is no such thing as a ‘limited strike’; any attack will be considered an invasion.”

Experts warn that US military action against Iran could trigger a series of chain reactions, making it difficult for the US to “bring it to an end.” These include US personnel casualties, rapid spillover of conflict, and impacts on global energy markets and supply chains. Wang Yongzhong, an expert at the Institute of World Economics and Politics at the Chinese Academy of Social Sciences, stated that Iran has the capability to close the Strait of Hormuz, and short-term tactical disruptions could cause panic-driven oil price surges globally. Additionally, Houthi attacks on US and Israeli ships could reignite the Red Sea shipping crisis, intensifying global inflation and supply chain shocks, which would also negatively impact the US economy.

Short-term Volatility May Intensify

Haitong Futures analysis states that in the short term, oil prices are focused on geopolitical factors. If conflict between the US and Iran threatens the Strait of Hormuz, current market sentiment and expectations suggest oil prices could surge higher. Conversely, if Iran compromises and military risks ease, the market will quickly lower its expectations. Given the current high level of uncertainty, it is advised to strengthen risk controls and participate cautiously.

Dadi Futures reports that the market currently does not strongly favor a full-scale war, but the probability of localized conflict remains high. For crude oil, potential supply losses require sufficient risk premiums. On one hand, localized strikes on Iranian oil fields and ports could impact production and port operations, with an estimated impact of 500,000 to 1.5 million barrels per day. On the other hand, Iran’s possible retaliation—such as closing the Strait of Hormuz—could affect up to 14 million barrels per day, though the likelihood of this extreme scenario remains relatively low.

Ruidar Futures predicts that international crude oil prices are expected to fluctuate sharply amid geopolitical tensions. As long as a large-scale war between the US and Iran does not break out, prices may experience pulse-like rises and then stabilize at high levels, awaiting the next driving factors such as OPEC+ meetings or US crude inventory data.

Will Oil Prices Drop When Geopolitical Tensions Ease?

Although short-term oil prices are supported by geopolitical factors, most institutions believe that in the medium term, oversupply in the global oil market will exert downward pressure. Once geopolitical premiums fade, oil prices are likely to fall again.

In February, the US Energy Information Administration (EIA) and the International Energy Agency (IEA) projected that in 2026, supply surpluses would be 3.05 million barrels/day and 3.73 million barrels/day respectively. While their estimates differ on the magnitude of surplus, both agree on the existence of excess supply.

Looking back at 2025, OPEC+ largely canceled production cuts for most of the year. Additionally, US shale oil production remained at record levels, and other exporters in the region also increased output. However, as the world shifts toward electrification and green energy, global demand for traditional energy sources like oil is expected to decline generally.

Historically, oil price movements are influenced by multiple factors beyond supply and demand. Many institutions forecast that commodities in 2026 will sequentially strengthen in the order of gold → industrial metals → oil → agricultural products. From a supply-demand perspective, current conditions do not clearly support this view. Yet, last year’s unexpected surge in gold and silver, and this year’s remarkable rise in non-ferrous metals like tin and nickel, have already sparked investor imagination. Recently, large capital inflows into sectors like oil, chemicals, and related industries are visible. As the “king of commodities,” crude oil’s trend will also impact downstream energy and chemical products, as well as bio-diesel demand, which could influence oils and sugars. If oil remains in a bear market, the latter part of this forecast may not materialize.

Ruidar Futures notes that even with ample supply, low overseas crude inventories and lower-than-expected stockpiling support crude prices at the bottom. Market pessimism about supply adequacy may be revised upward.

CITIC Construction Investment Futures also states that with OPEC+ slowing production increases and Trump easing climate constraints, US crude inventories remain relatively low compared to recent years. Coupled with high refinery utilization rates, downstream demand still provides strong support. Under these conditions, geopolitical events could amplify upward price movements.

Western Securities reports that over the past decade, global oil exploration investment has been declining, constraining long-term supply capacity. Since the Russia-Ukraine conflict, the US and OECD countries have sold off strategic oil reserves to suppress prices, which have fallen to historic lows. If tensions ease, replenishing reserves could push prices higher.

(Source: Xinhua Finance)