Why War in the Middle East is Moving Grain Prices

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🌍 Geopolitics & Middle East Developments

Iran’s Supreme Leader, Ayatollah Ali Khamenei, was killed over the weekend following a US-Israeli strike on Saturday that also eliminated several senior Iranian officials. Authorities reported that the attacks killed and wounded hundreds of civilians. The strike came after US-Iran negotiations aimed at addressing Iran’s nuclear program ultimately failed. In retaliation, Iran launched attacks against US and Israeli bases across the Middle East and vowed to continue further strikes. With no confirmed successor in place, Iran has established a governing council to lead the country until a new supreme leader is selected.

🛢️ Oil Markets & Strait of Hormuz Closure

Oil prices surged Sunday following the US and Israeli strikes. WTI crude oil futures opened more than $8 per barrel higher and were trading about $4.60 per barrel, or roughly 7%, higher early this morning. The rally is being driven primarily by the closure of the Strait of Hormuz. Following Saturday’s attacks, Iran announced the waterway would be closed to navigation, halting the flow of oil shipments. Roughly 20% of global oil supplies typically move through the strait. Also on Sunday, OPEC+ announced it would increase production by 206,000 barrels per day in April, though the modest boost is unlikely to significantly calm markets. See charts and maps below.

🇨🇳 China, Energy Security & Trump–Xi Summit

The strike could complicate President Trump’s upcoming visit to China. Beijing publicly condemned the attack and warned it could further destabilize the Middle East. Chinese officials are increasingly concerned that Washington’s pattern of removing foreign leaders could eventually extend to countries more closely aligned with China. If instability in Iran continues, China may deepen ties with Russia in an effort to secure energy supplies and counter US influence. Despite its strong rhetoric, China is not expected to intervene militarily. The Trump–Xi summit scheduled for later this month is still expected to proceed, though major breakthroughs appear unlikely. China imports about 14% of its crude oil needs from Iran and accounts for roughly 80–90% of Iran’s oil exports, as sanctions limit purchases from other countries.

🌾 Grain Markets React to Geopolitical Risk

Wheat futures surged on Friday. The Chicago May 2026 contract rose 17 cents to close near $5.92 per bushel, its highest level since July 2025. The rally was fueled by heightened US-Iran tensions that triggered short covering by the funds. Corn and soybean futures also moved higher, with May corn gaining about 5 cents to settle near $4.49 per bushel and May soybeans rising roughly 7 cents to close near $11.71 per bushel. Corn drew support from wheat’s strength, while soybeans benefited from expectations of increased demand from biofuel producers. Traders were clearly anticipating a potential weekend escalation on Friday. Grains showed some early strength overnight but were mostly steady early this morning.

📊 Fund Positioning – CFTC Commitment of Traders

The CFTC released its weekly Commitment of Traders report on Friday. For the week ending February 24, large money managers were net buyers of 29,000 corn contracts and net buyers of 12,000 soybean contracts. Funds were also net buyers of 52,000 SRW wheat contracts during the week. The net short position in SRW wheat shrank to 18,000 contracts, the smallest since October 2022. Private estimates suggested funds held a net long of about 25,000 wheat contracts at Friday’s close, along with a net long of roughly 180,000 soybean contracts and a reduced SRW wheat net short of about 10,000 contracts. See Fund Tracker charts below.

🌽 Crop Insurance Prices & Acreage Outlook

This year’s crop insurance pricing provides improved coverage for soybeans while corn faces greater downside risk. The spring projected soybean price is $11.09 per bushel, up 55 cents from last year. The corn projected price declined 8 cents to $4.62 per bushel. Spring wheat’s projected price stands at $6.19 per bushel, also 55 cents higher year over year. USDA recently projected US farmers will plant about 94 million acres of corn this season, down 4.8 million from last year, while soybean acreage is expected to increase to roughly 85 million acres, up 3.8 million acres. Although USDA data suggests corn still offers a per-acre profitability advantage, both corn and soybeans are projected to generate negative returns this season. See the spreadsheet below.