- Jimmy Jean, Vice-President, Chief Economist and Strategist
Marc-Antoine Dumont, Senior Economist • Florence Jean-Jacobs, Principal Economist
Commodity Trends
Could Iran and the United States Finally Have a Deal?
June 17, 2026
Highlights
- As expected, the United States and Iran appear to have reached an agreement in June to reopen the Strait of Hormuz, a strategic waterway through which about 20% of the world’s oil flows. There remains a risk that the deal could fall through, as with previous attempts, but markets seem more confident that this agreement will provide a lasting resolution to the conflict. A complex logistical operation must now begin: The more than 800 ships stuck in the Persian Gulf need to make their way out, while production of around 15 million barrels per day—which has been interrupted since the start of the conflict—needs to restart. The extent of damage caused by the war remains uncertain. We therefore expect Gulf exports and oil production to rebound more gradually than initially anticipated. Under these circumstances, the price of West Texas Intermediate (WTI) is likely to remain volatile in the short term, as the trajectory of global supply becomes clearer. We are therefore maintaining our year-end forecast of US$80 per barrel.
- The major loss of production in the Middle East tipped the global oil market into deficit, forcing a greater reliance on inventories to make up for the shortfall in supply. In the United States alone, commercial inventories have fallen by 3% and government reserves have shrunk by 16% since the start of the conflict. The US’s Strategic Petroleum Reserve is currently at its lowest level in 40 years. Even if the conflict has ended, inventories should continue to decline, as it will take several weeks—in some cases, several months—to normalize global oil flows. Replenishing inventories could provide modest support for prices toward the end of the year if the market returns to surplus.
- Industrial activity has remained relatively resilient despite higher energy prices. In this context, the Iran conflict’s main impact on base metals has been to drive prices higher, reflecting increased production and transportation costs. We expect base metal prices to lose some ground over the next few weeks as energy prices ease. After that, strong demand should send aluminum and copper trending back upward, albeit gradually, while iron ore and nickel may move sideways. The anticipated slowdown in the Chinese economy nevertheless represents a downside risk for the entire industrial metals complex.
- After reaching a record high of more than US$5,500 per ounce early this year, gold has pulled back and is now trading at around US$4,300 an ounce. This decline reflects changes in the factors that had underpinned the initial price increase. The conflict in Iran helped strengthen the US dollar, pushed up bond yields and increased expectations of monetary tightening. Central banks also slowed down their purchases. Some central banks in emerging economies that are net oil importers used their gold reserves to stabilize their currencies. A resolution to the Iran conflict could therefore ease pressure on the dollar and interest rates, while also encouraging central banks to resume their purchases. This would support the price of gold, though high prices continue to hold back physical demand, especially for jewelry.
- The conflict in Iran also affected agriculture, as it led to a sharp rise in the price of fertilizers, particularly urea, in March and April. Although fertilizer prices have recently fallen, it’s still too early to conclude that the market has stabilized, as it remains sensitive to geopolitical tension and price fluctuations for natural gas, a key input. Meanwhile, grain prices were less affected than they were at the start of the Ukraine war. Wheat, corn and soybean prices fell in early June due to good harvests in South America and favourable weather conditions in North America. In the short term, agricultural prices should generally hold steady, or even edge higher, with risks tilted to the upside. These risks are mostly related to the Middle East conflict’s delayed effects on production costs, as well as upward pressure from high oil prices, which boost demand for biofuels (supporting corn and soybeans). Over the longer term, supply could tighten for some crops: the USDA External link. projects that farmers will plant less corn and wheat in 2026–2027 to devote more acreage to soybeans, which require less nitrogen fertilizer. Current planting levels could limit soybean price gains in 2027, after those crops are harvested. We’ll also need to keep an eye on the risk of climate disruptions from El Niño.
- Conditions remain challenging for Canada’s forestry sector. The industry was already facing weaker US demand and high tariffs on softwood lumber, and now has to contend with operating costs that have been driven even higher by energy prices. Lumber prices remain broadly stable, as the slowdown in US residential construction has been partially offset by renovation demand, and sawmill closures have reduced supply. Finally, pulp and paper prices are relatively stable, although May saw the largest monthly advance in two years. Reduced sawmill activity is limiting the supply of wood chips, raising the cost of this input and weighing on producer competitiveness.
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