When you trade commodities long enough, geopolitical risk stops feeling like a disruption and becomes part of the background.
What has changed in recent years is the speed. Markets can reprice within hours – sometimes minutes – driven as much by sentiment and uncertainty as by fundamentals. Prices often move before anything has physically changed.
Recent discussions at the FT Commodities Global Summit in Lausanne made that point very clearly, with speakers describing disruptions already unfolding on a scale rarely seen in modern energy markets.
In practice, that means trading has become less about prediction and more about reaction. It is judgement, political awareness and adaptability, all at once. Volatility creates risk and opportunity at the same time. The focus is less on predicting exactly what will happen, and more on staying intact when the picture is still changing.
What the “risk premium” really reflects
When tensions rise, markets start pricing in the risk of disruption – that’s the “risk premium.” Prices move not because supply has changed, but because it might.
What feels different this time, due to the Iran war, is that some of that risk is no longer hypothetical. From what’s being discussed across the market, a meaningful amount of supply already looks to be offline, and total losses could exceed 1 billion barrels even if the conflict ended immediately – so part of the “premium” is now tied to actual disruption.
Once losses become physical, they feed directly into trade flows, fiscal balances and policy decisions.
The Strait of Hormuz is the clearest example. Even the threat of disruption is enough to move prices. If flows are actually constrained, it also exposes a structural issue – a large share of global spare capacity sits behind a single chokepoint.
In most conflict scenarios, the pattern is familiar:
This time the adjustment may be slower. When supply is disrupted and infrastructure is damaged, recovery takes time even if geopolitics stabilise.
The risk premium itself is not the issue – it is a necessary feature of the market. The challenge is timing. It reacts quickly to headlines and uncertainty, but often fades before the physical disruption is resolved. As a result, prices can normalise on sentiment while the market remains structurally tight.
The cost of reacting to every headline
In these environments, restraint often matters more than analysis.
News flow is constant. Prices react instantly to headlines, rumours and partial information, driving volatility. From the outside, it appears noisy.
At the same time, the scale of disruption being discussed in the market suggests that some of what we are seeing goes beyond short-term noise and points to more persistent supply tightness.
In practice, most mistakes come from chasing moves rather than missing them.
The key is separating noise from change. A ceasefire, policy signal or production shift can reverse pricing within hours. Acting too quickly, without context, often turns volatility into a loss.
Technology and the information edge
One important shift is data.
Satellite imagery, shipping analytics and AI now allow near real-time tracking of physical flows. Markets no longer depend solely on official releases.
This speeds up pricing, but does not necessarily stabilise it. Information is increasingly driven by data as much as by headlines, so moves can occur without clear news flow.
Risk management above all else
Periods of geopolitical stress rarely send clean signals. Political risk can push prices one way while fundamentals push the other.
Many geopolitical risks are low probability but high impact. They don’t happen often, but when they occur they reshape markets. That imbalance has to be reflected in how risk is managed.
Another point that has come up in FT discussions is how uneven the impact tends to be. Higher prices are global, but the ability to absorb them is not. Some economies adjust smoothly; others respond through demand destruction.
There are also second-order effects worth watching. Tightness in energy markets tends to spill into adjacent areas – from fertilisers to industrial inputs – which is often where broader economic stress often becomes visible first.
For me, the focus is less on predicting exact outcomes and more on mapping how different scenarios would play out.
Final thought
Geopolitical markets reward discipline more than conviction. Risk premiums appear quickly and can disappear just as fast. Narratives can shift within hours.
What the Strait of Hormuz situation highlights is that some disruptions are not just short-term price events. They can leave a longer tail in terms of supply and market structure.
That is why you cannot rely on predicting the next geopolitical event. You just need to be positioned so you can deal with it when it comes.
