It’s not just oil. The Iran war is disrupting many essential goods

The disruption to global commodity prices from the US-Israeli war with Iran is spreading far beyond energy markets.

From basic plastics and fertiliser made in Saudi Arabia and Oman to sugar from Brazil and helium from Qatar, the conflict has affected the price, supply or production of a variety of commodities that are essential to the global economy.

How severe the disruption becomes will depend largely on how long the conflict drags on.

A ceasefire could allow shipping lanes, airports and factories across the world to reopen, easing the strain.

But the outlook is uncertain.

President Donald Trump has sent mixed messages on whether the United States will de-escalate the situation, and Iran’s leaders have said they are prepared to continue counterattacks on American allies and threaten shipping traffic in the Persian Gulf.

In the meantime, the rising costs of some commodities could be passed on to consumers as companies look to protect profit margins.

“Inflation has become a major concern as input costs in many industries are rising,” said Chris O’Keefe, managing director and lead portfolio manager at Logan Capital Management, an investment firm.

“Consumer wallets will likely be crimped.”

Here are six major commodities, besides oil and gas, that are being affected by the war.

Aluminium

Aluminium prices jumped to their highest level in almost four years Monday as shipments from the region were disrupted, and by Tuesday afternoon the metal was up some 8 per cent for the month.

The surge followed a halt to deliveries from major aluminium smelters in Qatar and Bahrain, forcing buyers to hunt for replacement metal from Asia. Producers in the Persian Gulf accounted for about 8 per cent of the world’s supply of aluminium last year, according to the International Aluminium Institute.

They’ve become major producers of the metal because processing it requires huge amounts of energy, turning the region’s abundance of oil and natural gas into a competitive advantage.

But the raw materials for aluminium have to be imported, by ships that travel through the Strait of Hormuz — which has been effectively closed since the war began.

Aluminium is used in a wide variety of items, including aeroplanes, power lines and cans. The price spike could eventually show up in everyday purchases, said Alex Jacquez, chief of policy and advocacy at Groundwork Collaborative, a research group.

Ethanol and sugar

Some price gains have trailed the surge in global oil prices, but they’re not always what you might expect.

In Brazil, the world’s largest producer of sugarcane, the crop can be used for sugar or to produce ethanol, a fuel used in cars across the country. When ethanol prices rise, mills tend to shift production to that more profitable fuel.

That shift may be about to happen again.

With oil prices soaring, ethanol jumped about 10 per cent from the start of the war through the end of trading Monday. Gains like that could lead Brazilian processors to plan to use more cane for fuel when the next harvest begins in the coming weeks.

Sugar prices on the Intercontinental Exchange rose to a one-month high Monday before falling back Tuesday as global energy prices also tumbled.

Urea and sulphur

Roughly one-third of the world’s traded urea, the dominant form of nitrogen fertiliser, normally passes through the Strait of Hormuz. It’s produced in the Middle East because natural gas is an essential feedstock for the fertiliser.

Shipment and production suspensions are hitting just as farmers are preparing for the spring planting season.

Urea prices have risen as much as 35 per cent since the war began.

Sulphur, which is produced during oil and gas refining, is also essential for fertiliser production and used in many other industries.

The yellow powder makes it easier to cut, drill and shape certain metals, such as copper, without ruining the tools or machinery. Nearly half the world’s sulphur is now trapped on the Persian Gulf side of the Strait of Hormuz, according to CRU Group.

Much of that sulphur goes to China and Indonesia for fertiliser production and nickel processing, while African agriculture also depends heavily on shipments from the region.

“The loss of fertilisers could significantly impact the global agricultural sector, which could raise food costs and decrease food security globally,” said Wayne Winegarden, an economist at Pacific Research Institute, a think tank.

Helium

Helium is a vital gas for semiconductor manufacturing. It helps cool delicate equipment, powers MRI machines and supports research labs and defence technologies — and, of course, it’s used in party balloons.

Qatar produces roughly a third of the world’s helium, making it the second-largest supplier after the United States.

But production there has been disrupted since Iran struck the Ras Laffan Industrial City — the natural gas hub where the country’s helium facilities are.

More than a quarter of the world’s helium supply could be cut off if the Strait of Hormuz remains closed, Phil Kornbluth, president of Kornbluth Helium Consulting, told CNBC.