The Iran war has entered a stalemate, and what the market fears most is not a day or two of firepower, but rather the situation being &#34;dragged into the second quarter or even longer,&#34; leading to distortions in supply, logistics, inventory, and financial pricing. In a research report, Bank of America first breaks down the political pathways into several scenarios of varying durations, and then applies the same &#34;war duration—supply-demand gap—price/volatility&#34; logic to oil, gas, refined oil, coal, chemical raw materials, fertilizers, agricultural products, and metals.
According to the Wind Trading Desk, Francisco Blanch, a commodities and derivatives strategist at Bank of America Global Research, believes that the probabilities of the scenarios of &#34;regime hardening&#34; and &#34;quick resolution&#34; are now roughly equal, while the previously considered possible pathway of &#34;regime transition&#34; (Venezuelan-style peaceful transition, Libyan/Syrian-style chaotic transition) has almost been ruled out.
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On the energy front, Bank of America views the Strait of Hormuz as the &#34;master switch&#34;: once the strait is restored, many prices can fall back; if the recovery is slow, even if oil fields and refineries are not permanently destroyed, crude oil and refined oil will be forced to be repriced with a higher risk premium. In the new baseline scenario, the average price of Brent crude oil in 2026 is about $77.50 per barrel, with a peak possibly exceeding $240 during that period. The average price scenario for European natural gas TTF ranges from €40 to €150 per megawatt-hour.
More critically, this report does not confine the impact to oil and gas. Fertilizers (urea) are seen as the first break in the agricultural product chain, aluminum is viewed as the metal most resembling a &#34;supply shock,&#34; and sulfur (transported via the Strait of Hormuz) could extend the geopolitical conflict into a longer story of industrial product shortages through the African copper belt and Indonesian nickel industry. On the trading front, Bank of America believes there are at least three areas where the market has &#34;not priced enough&#34;: long-term contracts, cross-commodity relative value, and structural changes in correlation/volatility.
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<h2>Oil prices from $77.5 to $240: The longer it drags on, the more complicated the situation becomes</h2>
Bank of America divides the scenarios into four tiers: quick resolution, conflict extending to Q2, extending to Q3, and impacting the entire 2H26. Correspondingly, the average price of Brent in 2026 roughly falls at $70, $85, $100, and $130/barrel, with a peak indication of $240/barrel in the most extreme scenario.
They set the &#34;new median baseline&#34; for 2026 at $77.5/barrel: a supply-demand gap of about 1.1 million barrels per day appears in 1H26, turning back to surplus after supply recovery in 2H26. There are two key premises: first, energy assets do not suffer &#34;permanent damage&#34; lasting more than 12 months; second, the passage through the Strait of Hormuz can be quickly restored within a few days after the war ends. The report also acknowledges that these two assumptions may be overly optimistic—this is precisely why its risk range is drawn very wide
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Another noteworthy detail is that the research report reminds that WTI's long-term response to the war is minimal, while the spot discount with a steeper curve is actually deepening; in its view, U.S. shale oil is more sensitive to the &#34;12-month forward WTI,&#34; and the forward price has risen from about 56 at the beginning of the year to about 67, which may slowly induce more drilling and production responses, but this is not a buffer that can immediately fill the gap in the Middle East.
The impact on the refined oil market is even more severe than that on crude oil, as there are no strategic reserves for gasoline or diesel. The NYMEX heating oil crack spread once surged to $73 per barrel, the highest since the Russia-Ukraine war, before falling back to $59. Bank of America expects the average gas oil crack spread to reach $30 per barrel in 2026, higher than the average of $22 in 2025.
<h2>The speed of recovery in the Strait of Hormuz determines the price ceiling</h2>
The benchmark fact provided by the research report is: the Strait of Hormuz corresponds to a channel of about 20 million barrels per day of crude oil and refined oil, of which about 70% is crude oil and 30% is refined oil. When the strait's &#34;traffic is almost paralyzed,&#34; the issue is not just &#34;is there oil,&#34; but &#34;can the oil get out.&#34;
The capacity of alternative channels is clearly stated in the research report: the Saudi East-West pipeline to Yanbu is about 5 million barrels per day, the Abu Dhabi crude pipeline to Fujairah is about 1.5 million barrels per day; the Iraq Kirkuk-Ceyhan nominal capacity is 1.2 million barrels per day, but in the short term, it may only be able to squeeze out an additional 250,000 barrels per day. Therefore, BofA estimates that the announced or potential production cuts in the Middle East may exceed 10 million barrels per day, and warns that if the Strait of Hormuz remains blocked, the cuts could be even higher.
This also explains the research report's attitude towards OPEC+ production increases: on March 1, the OPEC+ &#34;Group of Eight&#34; agreed to restore an increase of 206,000 barrels per day, but the report directly raises the question—under the constraints of the Strait of Hormuz, can these increments truly reach the global market?
<h2>Aluminum: Middle East supply gap taking shape, LME warehouses nearing depletion</h2>
The Middle East accounts for about 9% of global aluminum supply, with major capacities concentrated in UAE's EGA (about 2.68 million tons/year), Bahrain's Alba (about 1.62 million tons/year), and Qatar's Qatalum (630,000 tons/year). According to a March 3 announcement from Norway's Hydro, Qatalum has undergone a controlled shutdown and is currently operating at about 60% capacity, with no set date for restart, and has issued a force majeure notice to customers. Aluminium Bahrain has also announced force majeure on supply contracts.
Shutting down aluminum smelters is a rare occurrence because the restart costs are extremely high—once the electrolytic cells freeze, they need to be completely rebuilt. This means that even if a ceasefire agreement is signed tomorrow, the production reduction impact of Qatalum will not disappear immediately.
Bank of America predicts a 1.2 million ton deficit in the aluminum market under a rapid ending scenario, with an average price of $3,163 per ton; **if the conflict extends to the end of the year, the deficit could expand to 5 million tons, with an average price potentially reaching $4,000 per ton, and in extreme scenarios, there is a possibility of exceeding $5,000 per ton
** Currently, LME aluminum warehouse inventories are close to historical lows, with about half of the existing inventory being aluminum of Russian origin, which is not the preferred delivery item for Western buyers. The United States has imposed a 50% tariff on aluminum, and both Europe and the United States are net importers, intensifying competition for limited supplies.
<h2>Copper and Zinc: Sulfur Supply Disruption is a Slow-Motion Crisis</h2>
The Middle East (mainly Saudi Arabia, Qatar, and Iran) contributes about 38% of the global sulfur shipping volume. Sulfur is converted into sulfuric acid, which is used in the hydrometallurgical extraction process (SX-EW) for copper mines.
The African Copperbelt imports about 2 million tons of sulfur from the Middle East each year, which is converted locally into sulfuric acid to produce about 1.5 million tons of copper—accounting for about 3% of global supply. However, this risk will not be immediate: sulfuric acid penetration into ore takes time, and producers typically have a 2 to 3-month inventory buffer. This means that if the blockade lasts more than two to three months, African copper production will begin to be significantly impacted.
Bank of America currently forecasts a baseline copper deficit of 453,000 tons in 2026, with an average price of $13,187 per ton (approximately $5.98 per pound). If African copper production is reduced throughout the year due to sulfur supply disruptions, the deficit could expand to about 1.4 million tons, theoretically supporting a further increase in copper prices of about 40%. For zinc, Iran's Mehdiabad mine supplies about 100,000 tons of concentrate to Chinese smelters each year, and this supply is now at risk. However, Bank of America also clearly points out that persistently high oil prices have a significant suppressive effect on metal demand—creating opposing pressures on both supply and demand sides, leading to uncertainty in trends.
<h2>The Pressure Point for Natural Gas is in Europe: Hormuz Blocks About 20% of Global LNG</h2>
The blockade of Hormuz affects about 20% of global LNG supply, with LNG from Qatar and the UAE almost completely halted. Europe's situation is more vulnerable than in 2022: at that time, the decline of Russian pipeline gas was gradual, allowing time to respond; this time, the supply cut is sudden. European natural gas inventory levels are currently close to the lows of 2022.
Bank of America's calculations indicate that for every month Qatar and the UAE halt supply, approximately 10% of Europe's gas storage capacity is consumed. If the supply cut accumulates to 10 weeks, TTF prices in Q1 2027 could potentially exceed the historical highs of 2022. In that scenario, Europe may have to restart imports of Russian natural gas through the Yamal pipeline or the Ukrainian pipeline.
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Qatar has also postponed the commissioning of its next wave of expansion projects from the end of 2026 to 2027. Under the baseline scenario (supply cut of 5 to 6 weeks), the average TTF price in 2026 is about €50 per megawatt-hour; if the conflict drags into the second quarter, the average price rises to €60, with peaks potentially reaching €150; under the worst-case scenario sustained throughout the year, the average price could reach €150, with peaks even hitting €500.
<h2>Chemical Raw Materials and Coal: Alternative Supply Chains Will Spread the Impact</h2>
In the NGL and petrochemical sectors, research reports emphasize two ratios: last year, about 37% of seaborne naphtha and about 24% of seaborne LPG passed through Hormuz. The &#34;trapped&#34; Middle Eastern raw materials will make it more difficult for Asia and Europe to fill the gap, and cracking facilities may even be forced to reduce load or shut down
The relative beneficiaries are the U.S. petrochemical system—relying on domestic NGL supply and not needing to traverse critical maritime passages. BofA estimates that if the Strait of Hormuz is long-term restricted and U.S. cracking units operate at full capacity, domestic ethane demand in the U.S. could increase by up to approximately 400,000 barrels per day year-on-year.
On the coal side, it is a typical &#34;gas-to-coal&#34; scenario. The research report provides a line through cost comparison: when Newcastle thermal coal is around $130/ton, coal power is clearly cheaper; it only becomes comparable to gas power at around $300/ton. As a result, the Asian power system will be more willing to burn coal when LNG is tight, and Europe may also see a &#34;pragmatic reversal&#34; under low inventory and energy security pressures. BofA has revised the average price of Newcastle thermal coal for 2026 from the pre-war estimate of $123 up to $150/ton, and presents scenarios where it could reach $200/ton or even approach the record high of 2022 under prolonged conflict.
<h2>Agriculture: Urea is the first card to fall, and this time the scale is much larger than in 2022</h2>
The research report's entry point into agriculture is not the grain prices themselves, but the inputs. It points out that since the war, agricultural products have generally risen, but urea has increased by 30%-40% in various places, significantly outperforming grains and oilseeds. There are two reasons: first, the Gulf region contributes about one-third of global urea exports, and transportation must traverse the Strait of Hormuz; second, nitrogen fertilizer production is highly sensitive to natural gas, with natural gas costs accounting for 60%-80% of the ammonia/urea chain.
The report describes the &#34;systemic risk&#34; of this round of fertilizer shocks as greater than in 2022: global urea supply is highly concentrated, with China, India, and the Middle East together accounting for about 65%-70% of global urea supply, and these regions are entangled with Gulf LNG supply. The report lists the spillover effects: India and Pakistan have begun to cut production due to gas supply issues from Qatar; Turkey has banned the export of stored urea; in Europe, Agrofert has reduced ammonia production at Slovakia's Duslo and Germany's SKW Piesteritz due to soaring gas prices.
Regarding grain prices, BofA views corn as the most &#34;vulnerable&#34; variety: it previously estimated that U.S. farmers' spring corn planting area could drop from 98.8 million acres to about 95 million acres, corresponding to a year-on-year reduction in U.S. production of 20-25 million tons. If nitrogen fertilizer shortages further suppress yields in other countries, U.S. exports will passively bear more balancing roles, with the report even projecting U.S. corn exports for the 2026/27 season to surge to 90-95 million tons, pushing the U.S. stock-to-use ratio down to about 8.7%, which could lead corn prices to rise to, or even exceed, $6 per bushel.
The report also positions wheat as a &#34;hedging tool for food security,&#34; while soybean oil is more directly influenced by energy prices due to its biodiesel properties; the transmission of fuel costs in transportation is also highlighted—U.S. truck freight indices have surged nearly 30% since the war, and maritime shipping rates have risen by 6%-8%.
Bank of America has raised its full-year forecasts for major agricultural products for 2026: wheat from $5.3 per bushel to $6.5, corn from $4.4 to $5.3, soybeans from $10.4 to $11.9, and soybean oil from $0.49 per pound to $0.65
If the war extends to the third quarter, corn prices may approach $7, and wheat $8.
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<h2>Gold: Scenario 2 is the most painful, while scenarios 3 and 4 provide the real bullish support</h2>
Bank of America maintains a 12-month target price for gold at $6,000 per ounce, but different war scenarios have vastly different implications for gold.
Scenario 2 (war extending to the second quarter) currently has the highest probability and is also the most painful time for gold. The U.S. economy is neither hot nor cold enough: growth is expected to drop to 2% to 2.5% (down from the previous forecast of 2.8%), and inflation may still be around 3% by the end of the year. This situation makes it difficult for the Federal Reserve to cut interest rates, directly weakening the most important upward driver for gold. The interest rate market has shifted from expecting rate cuts to pricing in rate hikes.
Scenarios 3 and 4 (extending to the third quarter or even the whole year) are the real bullish scenarios for gold: high inflation coexists with economic stagnation, and the Federal Reserve is ultimately forced to start cutting rates before inflation peaks. Historically, the misery index (unemployment rate + CPI) is highly correlated with gold, and in these scenarios, Bank of America predicts that gold will break through $6,000 to $6,500 per ounce.
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As for the potential adjustment in gold triggered by Kevin Warsh possibly taking over as Federal Reserve Chairman, Bank of America believes this does not constitute a clear short logic—most investors expect Warsh's ascension to bring a weaker dollar and higher Treasury yields, and historically, a weak dollar has never been accompanied by a sustained decline in gold.
<h2>Three things that have not been fully priced in</h2>
Current oil prices and the 3-month implied volatility of aluminum are above the historical average by 2 to 4 standard deviations, but the 1-year volatility is still close to the historical average. This indicates that market expectations of conflict are short-term. Bank of America believes that going long on forward volatility is valuable, especially for forward Brent options, as well as deferred options for soybean oil and corn—the impact of fertilizer shortages on agricultural supply will take time to reflect in prices, and the effects are more likely to manifest in longer-term contracts.
In terms of relative value, European energy has more upside potential relative to the U.S. (Brent to WTI), as U.S. SPR crude oil is flowing into the market. The supply shock in aluminum is more direct than in copper, which may outperform copper. The biodiesel properties of soybean oil allow it to benefit more from rising energy prices, and the price ratio of soybeans to corn is expected to narrow.
However, there is a turning point that cannot be ignored: once oil prices break through $160 per barrel, triggering a global recession, metal prices will face significant declines. Historical evidence from 1973 to 1975 and 1990 shows that high energy prices ultimately destroy demand, with energy being relatively resilient while metals and grains collapse first. If this conflict drives oil prices into that range, the differentiation within commodities will be far more severe than it is now

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Bank of America’s latest research report breaks down the Iran war into four major scenarios: the average price of Brent crude oil in 2026 is expected to rise gradually from $70 to $130, with extreme scenarios peaking at $240. The impact goes far beyond oil and gas—aluminum plant shutdowns are hard to reverse, sulfur supply disruptions threaten African copper mines, urea prices have surged by 30%, affecting global food prices, and European natural gas inventories are nearing dangerous lows seen in 2022. Bank of America bluntly states that in terms of long-term contracts, cross-commodity spreads, and volatility structures, the market is at least “not priced enough” in three areas

- The article discusses potential scenarios arising from ongoing conflict in Iran, affecting supply chains and pricing in various commodities.  
- Bank of America predicts significant price volatility, with Brent crude oil averaging $77.50/barrel to a peak of $240/barrel contingent on the duration of the conflict, while fertilizer and aluminum markets face substantial risks.  
- The analysis indicates that the recovery of the Strait of Hormuz is crucial for global oil and LNG supplies, with implications for energy prices and broader market dynamics if disruptions persist.

If the Iran war drags on, it will be far more than just a surge in oil prices