On March 1, the second day of U.S. and Israeli military strikes against Iran unfolded. In response to the sustained attacks, Iran launched a large-scale counteroffensive. Israeli Prime Minister Benjamin Netanyahu stated that operations would “further escalate” in the coming days. During a phone interview with Fox News, President Trump indicated he was aware of “how many targets remain to be struck,” noting that military operations were “moving very quickly.”
The conflict has now spread across the entire Persian Gulf, potentially pushing the Middle East into a dangerous abyss.
Amid heightened geopolitical risks, WTI crude futures opened higher today, surging over 11% at one point. As of press time, gains exceeded 7%. Spot gold and silver both rose over 2% intraday. Additionally, as the world's second-largest methanol producer, escalating hostilities may directly disrupt China's methanol supply, costs, and price expectations.
Multiple trading sources reported on February 28 that following U.S. and Israeli strikes on Iran, Tehran announced the closure of the Strait of Hormuz shipping lane. Several tanker owners and traders have suspended crude oil, fuel, and liquefied natural gas shipments through the strait.
The Strait of Hormuz serves as the vital export route for crude oil from Middle Eastern producers including Saudi Arabia, Iraq, Qatar, and the United Arab Emirates, handling approximately one-fifth of the world's seaborne oil shipments.
Based on an assessment of the impact from a complete six-week disruption of tanker traffic through the Strait of Hormuz, Goldman Sachs has set a real-time risk premium for crude oil at $18 per barrel. The firm stated in its report that this risk premium equates to the market pricing in a daily disruption of 2.3 million barrels of global crude supply over one year. Goldman Sachs noted, “While our risk assessment leans toward the upside, history suggests that price spikes driven by geopolitical shocks and temporary supply disruptions tend to be short-lived.”
According to the latest reports, the Organization of the Petroleum Exporting Countries (OPEC) announced on the 1st that eight major oil-producing nations have agreed to increase daily production by 206,000 barrels in April. The statement indicated that given the current stable outlook for the global economy and low oil inventories, the eight countries decided to adjust their output levels.
Meanwhile, underlying fundamentals failed to improve synchronously this week. U.S. crude inventories surged significantly over the past week, signaling renewed supply-side pressures. Galaxy Securities noted that OPEC+ maintaining its March production freeze imposes some constraints on supply but struggles to reverse inventory trends. Overall, short-term oil prices remain dominated by geopolitical risk pricing, while medium-term dynamics will revert to supply-demand rebalancing logic.
However, “the oil price increase may prove more enduring than fluctuations triggered by previous events, as markets have factored in both the price per barrel and the cost of transporting oil amid widespread conflict across the Middle East,” said Charu, Chief Investment Strategist at Saxo Bank. Even without a full shipping ban, elevated risk premiums, rerouting costs, and adjusted insurance rates could keep crude and freight expenses persistently high.
Beyond oil price spikes, this conflict will also impact the chemical industry, particularly affecting methanol imports. Chuangyuan Futures notes that Iran is China's primary methanol supplier, playing a pivotal role in the nation's methanol supply chain. Should the conflict escalate and persist, it could substantially disrupt China's methanol import schedule. The resulting supply disruption from reduced imports would provide strong support for methanol futures prices.
Baocheng Futures highlighted three pathways through which the conflict could impact the methanol market: first, supply contraction, as Iranian facilities face increased likelihood of reduced output or shutdowns due to natural gas shortages and security risks; second, logistics disruption, with shipping restrictions in the Strait of Hormuz affecting China's import pace; and third, cost escalation, as rising crude oil prices drive up costs across the entire industrial chain, pushing both futures and spot methanol prices upward.
Risk aversion sentiment also underpins precious metals' strength. Hareesh V, Head of Commodity Research at Geojit Investments, stated that heightened geopolitical risks could trigger a buying surge in precious metals, potentially pushing New York silver futures back above $100 per ounce. While extreme scenarios cannot rule out higher global gold prices, its trajectory will largely depend on how the conflict unfolds. In the near term, heightened market volatility and risk aversion are likely to keep investor sentiment supporting gold prices.
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