Commodities Market Enters "Super-Squeeze" as Hormuz Tensions Intensify, According to HSBC Analysis

HSBC Warns of 'Super-Squeeze' in Commodities Market

HSBC Holdings Plc has issued a warning about the commodities market, stating that it is in a "super-squeeze" that will worsen if the Strait of Hormuz remains effectively shut.

According to a report released on June 1, the longer the Strait of Hormuz is closed, the more inventories are run down, and the more likely it is that the market reaches "tipping points" for some commodities. However, it is difficult to determine precisely when this might happen.

Raw materials hit a record in mid-May, before paring gains as the US stepped up efforts to extend a truce in its war with Iran, which could reopen the critical waterway and eventually pave a way for an end to the conflict. Beyond the Middle East, HSBC's broad outlook also highlighted other bullish factors for commodities, including rising consumption for base metals such as copper, and a looming El Niño weather event that may hurt crop supplies.

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The overall commodities cycle remains in a so-called super-bull phase, but "this is very different to earlier 'super-cycles', because it is driven by supply disruptions," the analysts said. "Rather than a 'super-cycle', we have been calling it a 'super-squeeze'," they said, highlighting earlier bank research.

With Hormuz traffic still all-but shuttered, oil stockpiles "may reach critical functional lows, which could see sharper — non-linear — price rises and genuine shortages," they warned.

Commodity Prices

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Brent oil traded near $94 a barrel on Tuesday after a modest drop, well below Iran-war highs above $126. In other materials, aluminum hit a four-year high.

HSBC's warning comes as the global economy continues to navigate a complex web of supply chain disruptions, trade tensions, and climate-related events. The bank's analysts have highlighted the potential for a "super-squeeze" in the commodities market, which could have far-reaching consequences for the global economy.

As the situation continues to unfold, investors and policymakers will be closely watching the developments in the Strait of Hormuz and the global commodities market.