Obsolescence Iran Conflict: How Shortages of Copper, Oil, and Helium Burden the Economy

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The Iran conflict remains unresolved. Global inventories are strained, and the helium shortage is already impacting chip production. Learn how the shortages are affecting the availability and prices of copper, oil, and helium.

The rapid electrification, expansion of renewable energy, and massive investments in power grid infrastructure are expected to steadily increase copper consumption, while mine production and recycling are unlikely to keep up. According to forecasts, demand could exceed the available supply by several million tons by the mid-2030s.

Although the increased prices are once again boosting the attractiveness of new mining projects, most of these ventures are only economically viable with sustainably significantly higher copper prices—above the current level. Overall, the risk profile therefore points less to a noticeable price correction and more to a further, albeit gradual, price increase over the course of the coming year.

Fluctuations in the Oil Market Expected in the Coming Months

By the end of April, the oil market exhibited pronounced backwardation, indicating significant short-term supply shortages and intense competition for immediately available deliveries. Although prices eased slightly at the beginning of May following initial signs of cautious geopolitical détente, the developments in April highlighted the market's high sensitivity to geopolitical risks. Despite the slight easing, a significant risk premium remained embedded in prices by the end of the month. This reflects ongoing uncertainty about the pace at which disrupted energy flows can be restored and points to continued heightened volatility in the coming months.

Shortages of Helium for Chip Production

The conflict in the Middle East has revealed a new vulnerability in the global semiconductor supply chain by disrupting the supply of helium. Attacks on energy infrastructure in Qatar led to a halt in natural gas production, interrupting an estimated 30 to 40 percent of global helium production, as helium is obtained as a by-product of gas extraction. As a result, major suppliers, including Air Liquide, were forced to declare force majeure for certain customers.

The situation is particularly sensitive as helium is difficult to store and transport, requiring extreme cooling and specialized containers, making strict prioritization of deliveries necessary. Although helium accounts for only a small portion of the total costs in semiconductor production, it is indispensable for advanced manufacturing processes such as EUV lithography. As with previous shortages, it is expected that chip producers and medical facilities will be given priority.

Rising Interest Rate Expectations Burden Energy-Importing Regions Like Europe

The US dollar is supported by the improved sentiment in US stock markets as well as the relative insulation of the US economy from rising energy costs. Although the recent narrowing of interest rate differentials between the US and other currency regions might initially appear to be a burden for the dollar, we attribute less significance to this factor in the current environment.

In energy-importing regions such as Europe and parts of Asia, rising interest rate expectations are increasingly perceived as a potential burden on already fragile growth rather than as a positive stimulus for the respective currency. If the Strait of Hormuz is reopened in the short term, demand for the US dollar as a safe haven could decrease, potentially leading to temporary weakness. However, such a movement is unlikely to be lasting, as the markets are expected to quickly shift their focus to the prospect of interest rate cuts outside the US, aimed at cushioning further economic slowdowns—an environment that would ultimately support the US dollar once again. 

*Joel Frick is Investment Lead at Bendura Bank AG.

Obsolescence

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