Oil prices weakened as the US announced a temporary sanctions waiver on Iranian oil exports
Energy - Iranian sanction waiver
Oil prices came under further pressure yesterday, with ICE Brent settling 3.3% lower. The gradual increase in oil flows through the Strait of Hormuz continues to weigh on the market, while positive signals from US-Iran talks in Switzerland have weighed on sentiment. The real downward price pressure yesterday came from the US issuing a 60-day licence, which allows Iran to export oil. While the market sold off on this development, it shouldn’t be too surprising. This was one of the conditions in the US-Iran Memorandum of Understanding (MoU). Iran had already started ramping up exports following the lifting of the US blockade. This sanctions waiver will open more markets for Iran to sell its oil, including the US.
Looking ahead, the key uncertainty remains how quickly oil flows through the Strait of Hormuz can normalise. Obviously, this depends on how quickly upstream oil production in the Persian Gulf can return. While the consensus is that this normalisation will take months rather than weeks, price action in the oil market suggests a more rapid recovery. Clearly, the evolution of US-Iran talks will be crucial to how quickly energy flows resume. As we've seen in recent days, the ceasefire remains fragile. There’s a very real risk of a further flare-up in tensions.
Metals – Copper rises
LME copper prices edged higher yesterday, supported by reports of progress in US-Iran talks. This bolstered expectations for uninterrupted transit through the Strait of Hormuz and eased inflation concerns. Market fundamentals also remained supportive, with inventories continuing to decline across exchanges. SHFE stocks fell to the lowest level since December 2025, while LME stocks hit March 2026 lows.
Data from China's National Bureau of Statistics, meanwhile, showed refined copper output rose 2.2% year-on-year to 1.3mt in May. Output was supported by higher sulphuric acid by-product prices, which boosted smelter margins and encouraged stronger operating rates.
In other metals, data from the International Aluminium Institute (IAI) showed that global primary aluminium output rose 3.5% month-on-month to 6.2mt in May. This reflects higher production across most major regions. However, the aluminium market is still expected to remain in deficit this year. Supply disruptions linked to the Middle East conflict have removed an estimated 3mt of production from the market. Lost capacity is unlikely to return quickly given the lengthy restart process for smelters. We continue to forecast a global aluminium deficit of around 1.8mt this year.
China's aluminium production rose 2% YoY to 3.8mt in May as stronger margins supported smelter utilisation rates. Aluminium exports continued to increase, rising 16% YoY in May, supported by stronger international prices. However, further production growth remains constrained by government capacity caps.
Aluminium production increased across Europe and Asia ex-China in May, while Gulf output remained more than 35% below year-ago levels due to ongoing supply disruptions linked to the Iran conflict.
Agriculture – CS Brazil sugarcane crush
The latest fortnightly report from the Brazilian Sugarcane and Bioenergy Industry Association (UNICA) shows that sugar cane crushing in Central-South Brazil stood at 41.6mt over the second half of May. This is down 13.1% from a year ago. Sugar production fell 25.6% YoY to 2.2mt, as mills diverted more cane towards ethanol production. With sugar prices trading below ethanol parity, it makes sense for producers to increase their ethanol mix. Cumulative sugar production so far this season stands at 6.8mt, down 2% YoY, while the cumulative cane crush has risen 15.8% YoY to 144.7mt.
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