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In a record-breaking week for crude, it was the distillate complex that led the charge. Heating oil—the benchmark proxy for diesel—ripped 39% higher, ensuring that soybean oil led the ag complex to solid gains.
West Texas Intermediate crude futures, the U.S. benchmark, rallied 35% for the biggest weekly jump on record, while Brent, the global benchmark, gained over 26% to push above $90 a barrel for the first time since 2023.
It was all down, of course, to the virtual closure of the Strait of Hormuz and no clear end in sight for a widening conflict after the U.S. and Israel launched a joint attack on Iran last Saturday.
Distillate markets, which include diesel and jet fuel, have grabbed an even larger geopolitical risk premium than crude. As Zameer Yusof, an analyst at energy consulting firm Kpler noted earlier this week: “Roughly 10% of global gasoil (the international benchmark for diesel) and 20% of jet fuel trade depends on uninterrupted Hormuz transit, leaving supply chains acutely exposed to disruption risk. With Atlantic Basin supply already constrained by refinery maintenance, distillate balances remain structurally sensitive to further escalation.”
Rising oil prices are boosting demand for soybean oil as a critical blending feedstock for biodiesel. While optimism over impending government blending quotas and expanding domestic crush capacity had already fueled a strong year-to-date rally, the escalation in the Middle East has changed the stakes. Analysts and energy ministers are now warning that if the Strait of Hormuz remains closed, crude could surge toward $100 a barrel or beyond (see item below).
May soybean oil rallied 7.7% this week and has gained nearly 36% in the year to date. That’s aided a rally for soybeans, with the May contract rising 30 cents this past week to close Friday just above the $12 a bushel threshold at $12.00 ¼, a two-year high. May SRW wheat, meanwhile, rose 25 ¼ cents on the week to hit an eight-month high.
History shows the ag complex is positively correlated to crude oil futures. In a note ahead of this past week’s volatile market action, Peak Trading Research observed that in the 30 sessions over the past five years where crude oil rallied 4% or more, the broader commodity complex followed higher, with wheat and soybean oil showing the strongest co-movement.
Gulf producers shutting in production: Friday’s leg higher for crude futures came after the Wall Street Journal reported Kuwait would begin cutting production as it runs out of storage.Major storage facilities in Saudi Arabia and the United Arab Emirates are seen hitting capacity soon.
- Qatar’s energy minister told the Financial Times crude could soar to $150 a barrel in two to three weeks if tankers remain unable to pass through Hormuz.
The national average gasoline price rose to $3.32 on Friday, according to AAA, up 33.75¢ from a week earlier and the highest since September 2024. The surge in energy prices is stoking inflation fears, leading market participants to significantly scale back expectations for further Federal Reserve rate cuts in the first half of 2026.
No relief from Russia: Fertilizer producers in Russia, the world’s largest exporter, aren’t in position to make up a feared global shortfall stemming from the U.S.-Iran conflict due to a lack of spare capacity, Reuters reported, citing industry sources.
Around a third of global urea exports must travel through the Strait, along with other key crop nutrients. The conflict has sent urea prices soaring ahead of planting season in the northern hemisphere. U.S. producers are seen as likely to somewhat scale back corn acres as a result, while experts have begun sounding the alarm over a potential global food shortage.
Russia accounts for around a fifth of global fertilizer trade, but limited capacity, domestic export caps and recent Ukrainian attacks on major plants all constrain its ability to ramp up output, Reuters reported.
- In a remarkable twist, the U.S. granted India a 30-day waiver to purchase Russian crude in a bid to relieve a global supply crunch. The U.S. had previously slapped a 25% tariff on imports from India to punish New Delhi for purchases of Russian crude, removing the levy last month after India agreed to cut back on Russian imports and buy more U.S. energy.
E15 at last?: Rep. Randy Feenstra said a draft bill that would allow the year-round sale of E15 – a 15% blend of ethanol with gasoline – was on track to be finalized as early as Friday, Agri-Pulse reported.
Feenstra, an Iowa Republican, co-chairs the Rural Domestic Energy Council, which was appointed by House Republican leaders in January to come up with legislation after language that would authorize the sales was left out of an appropriations package to the anger of farm and ethanol groups. The council and House missed deadlines last month to draft and vote on legislation.
“We’re working with everybody to make sure we have a consensus,” Feenstra told Agri-Pulse. He said that once the draft bill is released, it should be introduced once House members return from recess the week of March 16.
Economy sheds jobs: The U.S. economy lost 92,000 jobs in February, the Labor Department said Friday, while the unemployment rate rose to 4.4%. That follows a gain of 126,000 jobs in January and was well short of the average economist guess for a gain of 50,000 jobs. Strikes in healthcare and brutal weather likely played a role, but the figure is nonetheless disappointing and will stir fears of stagflation – the pernicious combo of economic stagnation and inflation – as oil prices soar in response to the Middle East conflict.
Global food prices rise in February: The U.N. Food and Agriculture Organization’s Food Price Index averaged 125.3 points in February, up 1.1 points, or 0.9%, from its revised January level, the organization said Friday. Increases in the price indices for cereals, meats and vegetable oils more than offset declines in dairy and sugar, resulting in the first rise of the index after five consecutive monthly decreases. Compared to historical levels, the FFPI stood 1.3 points, or 1%, below its value a year ago and as much as 34.9 points, or 21.8%, down from the peak reached in March 2022.
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