Middle East supply shock drives broad commodity surge, pushing ANZ index near record highs.

Summary:

• Commodity prices surged in March amid Middle East conflict
• ANZ index rose 4.1% m/m, near record highs
• Gains broad-based; dairy, aluminium led
• Supply fears triggered precautionary buying
• UAE smelter damage tightened aluminium supply
• NZD weakness boosted local price index to record

Global commodity prices surged sharply in March, with the ANZ World Commodity Price Index rising 4.1% m/m, driven primarily by the escalation of the Middle East conflict that began in late February.

The move pushed the index to its second-highest monthly level on record in world price terms, surpassed only by the spike seen at the onset of the Russia–Ukraine war in March 2022. The breadth of the gains underscores the scale of the shock, with nearly all major commodity categories rising over the month.

Dairy prices led the advance, climbing 5.9% m/m as importers accelerated purchases to secure supply amid concerns over potential disruptions to global trade flows. While underlying milk supply remains relatively healthy, the current surge reflects precautionary demand rather than structural shortages, suggesting some risk of reversal once conditions stabilise.

Industrial metals also saw strong upside, with aluminium prices jumping 9.8% m/m. This was partly driven by direct supply disruption, after a major smelter in the UAE sustained damage in late March. Given Gulf producers account for roughly 8–9% of global aluminium output, the incident has tightened supply expectations and reinforced upward price pressure.

Agricultural markets also contributed, with meat and fibre prices rising 2.4% m/m amid firm global demand and constrained supply conditions. Meanwhile, forestry prices rose modestly, though margins remain under pressure due to rising shipping costs linked to higher fuel prices.

The New Zealand dollar weakened over the month, averaging around 2.8% lower against the US dollar. This amplified gains in local currency terms, pushing the NZD Commodity Price Index up 6.4% m/m to a record high.

Overall, the March data highlights how rapidly geopolitical shocks are feeding through into global commodity markets, with both direct supply disruptions and precautionary demand combining to drive a broad-based price surge.

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ps. Reserve Bank of New Zealand expected on hold tomorrow.

This article was written by Eamonn Sheridan at investinglive.com.