A new Bank of America analysis warns that a prolonged conflict tied to Iran would do far more damage than a temporary spike in crude prices. Markets fear not days of missiles but months: once fighting stretches into the second quarter and beyond, supply, logistics, inventories and financial pricing begin to distort together, producing cascades across energy, metals, agriculture and chemicals.
The report treats the Strait of Hormuz as a global “master switch.” If the strait’s traffic is restored quickly many prices could retreat; if disruption persists, even intact fields and refineries will face higher risk premia. Bank of America’s baseline scenario pegs Brent at roughly $77.50 a barrel for 2026, with peak readings in stressed episodes that could breach $240; alternative scenarios see 2026 averages of $70, $85, $100 and $130 depending on the conflict’s duration.
Refined products are in sharper danger than crude because there are no strategic reserves for gasoline or diesel equivalent to SPR crude. The study shows diesel and heating oil crack spreads spiking to post‑Ukraine highs, and warns that even if crude production survives, the inability to move product will force much higher prices for finished fuels. Markets should also note that long‑dated WTI contracts respond slowly to the shock—US shale can raise production but mainly to support nearer‑term prices rather than instantly replace Middle East exports.
The disruption is not limited to hydrocarbons. Aluminium output is vulnerable because Gulf producers account for nearly 9% of global supply and smelters that shut down are costly and slow to restart. Bank of America’s scenarios project an aluminium deficit of 1.2 million tonnes under a quick end and up to 5 million tonnes in a drawn‑out conflict, with price averages rising from $3,163/tonne to $4,000 or more and potential spikes above $5,000 in extreme outcomes.
A less obvious propagation channel is sulphur, shipped from the Gulf and converted to sulphuric acid critical for copper extraction in Africa’s Copperbelt. Delays of two to three months would still allow buffers; beyond that, copper production could fall materially, widening an already significant projected deficit for 2026. Zinc and other metal flows face similar concentrated‑supply risks, but persistent high oil prices would eventually sap industrial demand and create large divergences across commodities.
Gas markets look especially precarious for Europe. Gulf LNG supplies account for around 20% of global LNG and a stoppage would rapidly drain European storage; each month of lost flows from Qatar and the UAE could consume roughly 10% of Europe’s working gas inventories. Scenarios in the report push TTF averages to €40–150/MWh depending on duration, with peaks that could dwarf 2022 highs and force difficult trade‑offs, including renewed reliance on Russian pipeline gas or severe demand destruction.
Agriculture is likely to be hit through inputs rather than harvests at first. Urea and ammonia are concentrated in the Gulf, and fertiliser production is tightly coupled to natural gas prices; the study highlights urea as the first domino. Fertiliser supply squeezes would lower planted areas and yields—especially for corn—forcing tighter US exports and lifting grain prices: the report raises its 2026 forecasts markedly, with corn and wheat seeing significant upside if disruptions extend into planting season.
Financially, the Bank of America team sees three underpriced areas: distant‑delivery contracts, relative value across commodities, and a structural reshaping of volatility and correlations. Gold’s reaction is non‑linear: a short war that drags into Q2 could be the most uncomfortable environment for bullion because central banks would be reluctant to ease; a longer, stagflationary outcome would be strongly bullish, with projected gold targets many times current levels in the bank’s stress scenarios.
The broader macro risk is a familiar but brutal truth: once oil crosses an implicit tipping point—Bank of America points to roughly $160/barrel—global demand could tip into recession and commodity prices would then diverge sharply, with energy holding better while metals and some agricultural prices collapse. That self‑reinforcing dynamic makes the length of the conflict the critical variable for markets, policy makers and corporates planning supply‑chain resilience.