Commodities Flash

• The movements of global markets are of trivial importance compared with the value of human life and our thoughts are with those affected from the ongoing conflicts in the Middle East.
• We have received an array of client queries surrounding the implications for energy markets from heightened geopolitical tensions in the Middle East. We address commonalities in a Q&A format:
  • What geopolitical risk premium is embedded in today’s market pricing and has the escalation in the conflict changed MUFG's base case forecasts for oil prices?
  • What are the key oil disruption scenarios in the event of escalation and what is the implications for oil prices?
  • Can the ~6m b/d of OPEC+ crude spare capacity be used to offset any potential Iranian oil disruptions?
  • Beyond crude oil, what are the implications for natural gas markets in the event of an escalatory cycle in the Middle East?