"Not over yet; the situation is worsening!" HSBC warns: Dual chokepoints causing 'super squeeze' in commodities

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Maritime transportation choke points are consecutively disrupted, and the global commodities market is facing a new round of supply shocks.

On Friday, HSBC Chief Economist Paul Bloxham warned that as the Middle East conflict continues to escalate, the global commodities market has once again entered a supply-driven phase. Shipping through the Strait of Hormuz has nearly ground to a halt, navigation through the Bab-el-Mandeb Strait is persistently disrupted, and with the situation in the Black Sea deteriorating further, multiple key global trade corridors are under simultaneous pressure, rapidly intensifying supply chain risks for energy, grains, and chemicals.

Driven by supply concerns, international commodity prices have recently strengthened across the board. Brent crude at one point exceeded $100 per barrel, European and Asian natural gas prices surged over 40% in a single month, wheat prices rose to a three-year high, and prices for refined oil products such as diesel and aviation fuel have continued to climb.

Meanwhile, Wall Street institutions such as Goldman Sachs, JPMorgan Chase, and Royal Bank of Canada have recently raised their oil price forecasts, suggesting that if shipping disruptions persist, the global commodities market could see a more dramatic revaluation of prices.

Crisis in Key Maritime Passages Spreads, Scope of Supply Shock Broadens

According to industry monitoring data, shipping flow through the Strait of Hormuz has come to a near standstill, with geopolitical disruptions rapidly spreading to the Bab-el-Mandeb Strait—a strategic chokepoint for Saudi crude exports to Asia and Eurasian trade passing through the Suez Canal. The Russia-Ukraine maritime conflict in the Black Sea region is heating up as well, with several critical routes simultaneously hindered, putting systemic pressure on the global commodity supply chain. Market doubts over the feasibility of alternative logistics routes are deepening.

In recent months, the absence of more severe price volatility was mainly due to the proactive release of reserves, including the release of the US Strategic Petroleum Reserve. However, the effectiveness of this buffer is rapidly diminishing. With inventories continuing to fall, renewed concerns over critical thresholds could trigger non-linear price surges, as economist Paul Bloxham puts it, "The longer the disruptions persist, the greater the risk of a nonlinear and sharp rise in commodity prices."

Amidst acute supply shocks, the commodities market is becoming increasingly fragmented, evolving into localized pricing systems that are detached from each other. For the same commodity, price spreads between different delivery locations and periods have widened significantly, and the reference value of traditional composite benchmarks is declining. Bloxham further cautions that inventory reduction can only provide a limited hedging window. The current situation continues to deteriorate and is far from peaking.

Institutions Raise Forecasts Together, Goldman Warns Brent Could Exceed $120

Several Wall Street institutions have recently intensified their risk warnings for the commodities market.

Helima Croft, Head of Global Commodity Strategy at RBC, pointed out that the current geopolitical conflict has entered a "dangerous stage," with threats to Red Sea shipping and critical energy infrastructure expanding. Goldman Sachs strategist Daan Struyven further quantified the potential impact: If the crisis in the Strait of Hormuz persists, Brent crude prices could exceed $120 per barrel in the fourth quarter.

This expectation is being confirmed in the end market. The US national average price of regular gasoline has once again risen above $4 per gallon, touching an extremely sensitive threshold for the US political system. The rise in energy costs is transmitting from the futures market to the consumer side, creating real economic and political double pressures.

But this shock goes far beyond energy. According to Bloxham’s report, urea prices have risen 13%, wheat prices have reached a three-year high, and aviation fuel and diesel prices are climbing in tandem. Supply constraints are spreading shocks to the agricultural commodities market through fertilizer, fuel, and food channels, and the global food supply chain is facing new cost pressures.

Bloxham characterizes the current situation as a "super squeeze" and emphasizes that this trend is far from reaching its peak. With generally low inventory levels and multiple key supply corridors simultaneously obstructed, the market's buffer capacity for further price shocks has been significantly weakened.

Investors should be wary of chain reaction risks across categories—from energy to agricultural products, from industrial raw materials to consumer goods, the price transmission chain is tightening. The duration and intensity of this squeeze may depend on geopolitical developments and the pace of policy responses, but a fragile short-term pattern has already formed.

Risk warnings and disclaimerThe market entails risks, and investment should be made cautiously. This article does not constitute personal investment advice and does not take into account the unique investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, viewpoints, or conclusions in this article are appropriate to their particular circumstances. Investing based on this is at your own risk. ```