The effective closure of the Strait of Hormuz due to ongoing Middle East conflict has triggered significant disruptions across global commodity and financial markets, with direct impacts on oil, metals, and currencies. Aluminium Bahrain (Alba) initiated a phased shutdown of three production lines, representing about 19% of its 1.6 million-tonne-per-year capacity, citing supply and transit disruptions through Hormuz. This move, following a force majeure declaration earlier in the month, underscores structural tightness in aluminium markets, particularly in Europe where inventories remain low and regional premiums are expected to stay elevated as long as disruptions persist [1].
Oil prices have surged, with U.S. crude topping $100 per barrel again after the U.S. and Israel launched military operations against Iran, targeting Kharg Island, Iran's main oil export hub. President Donald Trump stated that oil infrastructure was not struck, but retaliatory attacks from Tehran on Israel and other Arab energy infrastructure have heightened supply risks. The conflict has entered its third week with no clear resolution, rattling financial markets and prompting the White House to consider delaying diplomatic efforts with China to pressure Beijing to help reopen the Strait [4][6]. Retail investors have responded by pouring record sums into oil-linked ETFs, with net retail buying hitting $211 million on March 12 and the United States Oil Fund (USO) seeing $32 million in inflows last Thursday. Analysts liken this surge to 'meme-style' trading, driven by volatility and speculative interest [5].
The energy shock has also fueled a bullish breakout in the US Dollar index, which closed above its 96.000–100.00 range, supported by rising oil prices. MUFG expects the Dollar to remain strong as higher energy costs deepen the negative shock to global growth, disproportionately affecting G10 currencies such as the euro and pound. European economies are seen as facing a bigger negative hit than the US from the energy price shock, with central bank policy updates unlikely to provide much support for their currencies [2]. The South African Rand has lost nearly 6% against the US dollar since the start of the month, suffering from weaker precious metals exports and higher imported energy costs, despite positive domestic economic data. Commerzbank warns that the challenging external environment will keep the Rand under pressure [3].
Gold prices remain subdued near $5,000 per troy ounce, losing ground for the fourth consecutive session as rising energy prices mount inflationary pressures and lower expectations for US Federal Reserve and other central bank rate cuts. Safe-haven demand for gold has eased following reports that the US may announce a coalition to escort ships through Hormuz, and European Union foreign ministers are discussing a possible naval response. US Energy Secretary Chris Wright expects the conflict to end within "the next few weeks," potentially allowing oil supplies to recover and energy prices to decline [4].
European stock markets opened mixed, with oil and gas stocks leading gains due to elevated Brent crude prices, while autos, utilities, and travel stocks lagged. Commerzbank shares jumped 3.8% after UniCredit launched an offer to increase its stake above 30%, while UniCredit shares traded down 2%. The ongoing Middle East unrest and high oil prices remain the key focus for global markets, with central banks' policy meetings overshadowed by the conflict's impact on rate expectations [6].
CONCLUSION
The closure of the Strait of Hormuz has intensified volatility across oil, metals, and currency markets, driving record retail participation in oil ETFs and supporting the US Dollar. Aluminium and precious metals markets face supply constraints, while gold remains subdued amid fading rate cut bets. The conflict continues to unsettle global financial markets, with central bank policy decisions overshadowed by geopolitical risks and elevated energy prices.