How the Iran Conflict Will Impact Commodities
Lowell’s John Forwood has a positive view of gold and other commodities, despite shock from Iran conflict
Lowell Resources Fund chief investment officer John Forwood says the outlook for commodities remains strong.
The US and Israel’s war with Iran has led to a surge in oil and gas prices and while some other commodities have taken a hit in the process, the fundamentals remain intact.
Gold has been particularly volatile, falling from a high of more than US$5400 an ounce in February to as low as US$4200/oz last week.
“Up until the invasion of Ukraine by Russia, there was almost a one-to-one correlation between the gold price and the inverted US interest rates, represented by US 10-year TIPS,” Forwood said.
“But post the invasion of Ukraine, when there was confiscation of Russian US dollar assets, there was a complete breakdown in that relationship, and that was because non-Western central banks, particularly China, Russia, places like Turkey etc, became very worried about the US dollar assets being confiscated by Western governments.
“They started buying they started buying gold, and they didn’t worry about what US interest rates were doing.”
Forwood, who will deliver a keynote address at this month’s Mining Forum Europe, said since the start of the Iran conflict, that relationship had started to re-correlate.
“That is really the question for gold is, will that re-correlation last?” he said.
“I think it is very volatile, but we have seen gold bounce from a low of US$4100/oz only a week or so ago, back to US$4600-4700 today, so maybe we are starting to see that de-correlation breakout again.”
Citing data from BlackRock about gold’s performance in previous crises, Forwood pointed to the pandemic, when gold fell 7% in the first month, and the Global Financial Crisis, when it dropped by 20% in the first six months.
“That’s attributed to the fact that there is a flight to liquidity,” he said.
“Gold is obviously pretty liquid, and gold was sold to buy US dollars.
“At the immediate start of those two crises, the US dollar strengthened, as it has done at the start of the Iran war.
“However, as those crises wore on and the situation perhaps became clearer, gold outperformed.”
Forwood said gold and the US dollar had already followed the playbook of those two previous crises.
“Where to from here? Do we see gold bounce back? Well, if it is following the playbook of those previous two crises, then we will see gold do nicely from here and outperform over the next, say, 12 months,” he said.
“But we have been seeing selling. We’ve heard Turkey doing gold swaps. We’ve heard Russia banning gold exports, etc, as they seek liquidity and seek to shore up their finances as a result of their economies being hit hard by the oil crisis.”
Lowell said strong deviations in oil prices had historically led to recessions.
“We’re looking at a high likelihood of increased pressure on inflation, and also a reasonable likelihood of seeing a recession in the US and elsewhere,” he said.
“So really, central banks are caught between a rock and a hard place, and Jerome Powell, of the US Fed, has come out and definitely hedged his bets.
While Australia increased interest rates in March, Lowell said most other central banks had been sitting on their hands.
“Very difficult decisions for central banks at the moment – do they try and squash inflation, or do they try and promote growth?
“That’s what they’re always trying to decide, but at the moment, a very, very difficult decision, and most of them are doing nothing.”
Winners and losers
Tungsten has been one of the biggest commodity movers in late 2025 and 2026.
“It’s up over 500% in in 12 months, hitting highs that no one ever really dreamed of,” Forwood said.
Its initial price spike was driven by Chinese export restrictions implemented last year.
“But tungsten in the military sense is very important for things like bunker-busting bombs, because it’s such a hard metal,” Forwood said.
“While military uses only occupy 10% of tungsten demand, that is being depleted very, very rapidly, and buyers for military purposes are out competing with industrial end users for acquiring tungsten.
“I think the outlook for tungsten, while it has spiked and it’s highly unlikely to stay at these elevated levels for the long term, it’s very hard to see where additional Western supply is going to come from in the near to mid-term.”
Forwood expects the tungsten price to remain elevated for the next 3-5 years.
Aluminium had been another winner with some capacity in the Middle East being taken offline due to missile attacks.
“With aluminium, you need to ship bauxite, and then you need to ship alumina, and then you need to ship aluminium to actually get aluminium to market, so there’s potentially a lot of shipping involved,” Forwood said.
“Aluminium is sometimes called solid energy, because really it requires a huge amount of energy to produce, so the aluminium price, I think, is going to have upwards pressure on it for some time to come.”
On copper, Forwood noted inventories had skyrocketed, though that was occurring before the conflict began.
The copper price more than halved in the first six months following the GFC and was down about 10% since the start of the Iran war.
“In the short term, we probably expect to see more pressure on copper prices as a result,” Forwood said.
The consumer sector accounted for nearly a third of copper consumption.
“If we are heading into a recession, then you could expect the consumer sector to perhaps thrift on its usage of copper,” Forwood said.
“Having said that, if we are heading into a new energy market, then you don’t have electricity without copper, and demand for copper in the mid-term looks very, very strong and rosy, particularly when you’re talking about things like the build-out of data centres, which just use huge amounts of electricity, and hence need large amounts of copper.”
Energy addition, not transition
Forwood said the term “energy transition” wasn’t quite right.
“It should be energy addition, because today, the world is using more wood than it’s ever used before. We haven’t transitioned away from wood,” he said.
“It’s using more coal than ever before. We haven’t transitioned away from coal, and we’re using more oil than ever before, so we certainly aren’t transitioning away from oil.”
As well as oil and gas, thermal coal prices had jumped since the start of the conflict.
“There’s going to be further enthusiasm for the build-out of nuclear reactors to try and somewhat insulate countries’ power supply from the results of the Iran war or similar events in the future,” Forwood said.
Germany has been backtracking on its retreat from nuclear, while Taiwan was planning to restart reactors.
“I think that whole renewal of the nuclear sector is only going to be put on steroids as a result,” Forwood said.
The changing energy dynamic was also positive for lithium and other commodities used for lithium-ion batteries.
Google searches for electric vehicles had spiked and Forwood said the head of BYD Australia had reported a surge in enquiries in March.
“While the death of ICE engines was perhaps very prematurely forecast, there’s definitely going to be a lot more interest in lithium batteries as a result of fuel shortages and fuel prices,” he said.
“Even before the war, the lithium price had rebounded very, very strongly … and the deficit was starting to open up, so I think we can see some pretty strong support for the lithium price.”
Forwood said other non-metal commodities to watch were helium, which was a by-product of liquified natural gas, and sulphuric acid, used as a key input in the production of metals including nickel, copper and uranium.
Fertiliser shortages are a concerning flow-on impact of the conflict, as the Middle East produces 46% of global urea supply.
Urea prices were already up 60-70%.
“Here in Australia, we are entirely dependent at the moment on imported urea, so that is a very worrying situation that fertiliser prices have skyrocketed, and the availability of fertiliser, more to the point, is also restricted,” he said.
“With planting seasons coming up in the Northern Hemisphere, winter planting coming up in places like Australia, there’s words being bandied around like catastrophic effect if, in terms of food supply, if the fertilisers don’t get to the farms in time.
“So that is particularly worrying. It’s not something that we invest in, but certainly something that could keep you awake at night.”