Oil Prices Surge to $119 as War Lifts Sugar Markets

ICE Exchange Records Oil Prices Surge as War Lifts Sugar Markets

Global commodity markets recorded sharp movements on Monday after oil prices surged amid the ongoing United States–Israel war with Iran. The rise in energy prices triggered gains in sugar markets as traders reacted to the potential shift in Brazil’s sugarcane usage toward ethanol production.

Crude oil prices climbed to $119 a barrel, reaching their highest levels since mid-2022. The increase came as the Strait of Hormuz remained virtually closed, cutting off access to nearly a fifth of global oil and liquefied natural gas supplies.

Ethanol demand linked to rising crude prices

Brazil, the world’s largest sugar producer and exporter, plays a central role in global sugar supply. The country also produces most of its ethanol using sugarcane, directly linking energy prices to sugar production decisions.

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As crude prices climb, ethanol demand tends to rise. Alberto Peixoto, director at broker and consultant AP Commodities, said the surge in oil prices has strengthened demand for biofuel production.

If mills divert more sugarcane toward ethanol production, the raw material available for sugar manufacturing could decline. This expectation contributed to the upward movement in sugar futures during Monday’s trading session.

Sugar futures rise on global exchanges

Raw sugar futures on the ICE exchange settled up 0.49 cent, or 3.5 percent, at 14.59 cents per pound. White sugar futures also increased, rising 1.4 percent to $420.50 per metric ton after earlier gaining nearly 3 percent.

Market participants also pointed to investor activity as another factor behind the price movement. A US-based sugar broker said funds appeared to be reducing their near-record short position in raw sugar.

According to the broker, some investors are seeking to limit exposure to a potential spike in sugar prices if oil markets continue rising.

Currency strength and Gulf demand risks

The increase in energy prices has overshadowed the impact of the stronger US dollar. Normally, a rising dollar puts pressure on commodities priced in dollars by making them more expensive for buyers using other currencies.

However, analysts say concerns remain about weaker demand from Gulf countries. Sugar consultant Michael McDougall said Gulf states import around 10 percent of the world’s raw sugar through the Strait of Hormuz each year.

Any prolonged disruption in the shipping route could affect trade flows and purchasing activity across the region.

Other soft commodities show mixed gains

Movements in other soft commodities were also recorded during the trading session. Arabica coffee rose 1.2 percent to $2.969 per pound after gaining 4.5 percent last week.

Robusta coffee remained largely unchanged at $3,771 per ton following a 4 percent increase in the previous week. Cocoa prices also moved higher, with London cocoa rising 1.8 percent to 2,358 pounds per ton.

New York cocoa also climbed 1.8 percent to close at $3,289 per ton. Commodity markets continue to react to disruptions in global energy supplies linked to the ongoing Middle East conflict.

The broader impact of the conflict on energy markets was reported earlier in this related coverage.