THE notion that the gentle flap of a butterfly’s wings can cause chaos on the other side of the world is well known. But commodity markets have been tested in recent weeks by what could be called the 800-pound-gorilla effect: the idea that chest-beating in the White House can unleash turmoil in global metals, agricultural and energy markets.
President Donald Trump has slapped sanctions on Russia’s biggest aluminium producer, Rusal, intensified a trade tiff with China and tweeted a gibe against OPEC, the oil-producing cartel.
His actions have shaken commodity markets at a time when speculation in futures is near the record heights of 2012, making markets even more volatile (see chart). Aluminium, nickel and palladium prices have soared and then plummeted. Soyabean markets are under threat. Oil prices are at their highest levels for more than three years.
Physical trade has been affected too, with some shipments to Rusal of bauxite and alumina, the raw materials of aluminium, suspended for fear of sanctions-busting, and cargoes of American sorghum to China diverted in mid-ocean because of Chinese trade restrictions.
Pushing oil prices yet higher is the possibility that Mr Trump could impose sanctions on oil shipped from Iran and Venezuela next month, tightening the global supply of crude just as America’s summer driving season starts. Geopolitics has often upset global trade in commodities. But rarely has America’s government been such a source of upheaval across so many markets.