Resources and Diplomacy
Commodity supply imperatives in a decoupling world economy
War over Iran
After four months of fighting, in the early summer the parties to the Iran war were edging towards a lasting peace deal despite several unconvincing attempts in recent months at cease fires.
By the end of June oil prices had collapsed to pre-war levels, in no small measure because of the massive and coordinated drawdowns of stockpiles by major players. In the US, the Strategic Petroleum reserve drew down 75.1m barrels and gasoline inventories fell by 39 million barrels, close to the record lows since the Global Financial Crisis.
But by mid-July, patience in the White House was wearing thin while a newly belligerent Tehran seemed ready to resume its long game, and suddenly a cease-fire 'deal' was looking as far away as ever.
Throughout the war, however, crude oil prices have tended to react more to headlines than the realities of supply and demand. The logic of the New Energy Market Order dictates higher prices for longer and probably some patchwork series of tariff, toll and kickback arrangements payable to Iran over the long term will be unavoidable for many oil consuming nations.
For Donald Trump's America, the goal is a return to market stability with tangible concessions on at least some of the demands not met by the Obama deal of a decade ago; for Iran the prize is the survival of Hezbollah in Lebanon and the wider region. For now there is still a chance of a deal, but with US Mid-terms closing in, the US President's options are becoming less attractive than before. However events play out, it will take a blend of complex chemistries as well as a businessman's art to satisfy all parties concerned, not least the US electorate.
Ukraine Conflict continues in the background as Oil Sanctions are eased
Western sanctions on Russia's exports of oil were eased in part to offset the near total cut-off of oil leaving the persian Gulf. Russia stands to benefit enormously, as sanctions had been having a major impact on its economy after 4 years of war.
In the wake of its hostilities with in Ukraine, in combination with the collateral disruption to supplies of energy and curtailment of grain exports from both countries, the Russian invasion initially caused intense commodity market turbulence for several months in late 2022-early 2023. However, over time, as to a large extent prices settled down as new buyers were found for embargoed commodities and new sources of supply emerged for sanctioned exports.
The Critical Minerals Security Pact struck between US President Trump and Ukraine's President Zelenskiy in 2025, if implemented, signals a new paradigm for global commodities trading. The soft border that still exists, no matter how frayed, between geopolitics and finance may still give way to a solution where commerce becomes paramount even at the cost of hard fought military and political objectives.
Beyond Ukraine, from the closing months of last year to the present day, almost anywhere on the global map may become subject to threats of invasion whether from superpowers-regional powers with their local strategic ambitions. With US-China trade relations taking a turn for the worse and tariff threats being tossed around by the US with regularity, access to critical minerals whose supply is dominated by Beijing and its state-backed enterprises in recent months has been moving to centre stage. The EV industry and battery technology depend on several key elements including lithium, cobalt, graphite and phosphorous as well as copper, nickel and manganese.
