IEA flags Middle East supply risks as Latin America mineral race tightens
Escalating Middle East conflict threatens oil, gas and critical mineral supply chains Latin America is counting on to build transition-era revenue.
The IEA on Sunday (2026-07-27) warned that escalating conflict in the Middle East raises renewed uncertainty over oil supplies, LNG exports and critical mineral supply chains, adding a new dimension to a disruption story that had previously centred on crude alone.6 The agency's alert landed as geopolitical tensions threaten supply chains for $6.5 trillion worth of goods outside China each year, a figure that captures how far the exposure runs beyond the oil market.5
The warning cuts across two narratives that have largely traded separately: the immediate price threat from a Middle East disruption and the longer-term scramble for lithium, nickel, cobalt, graphite and rare earths. Both are now moving at the same time.5
IEA member nations have made approximately 290 million barrels of oil available since announcing a collective response on March 11, with additional volumes continuing to enter global markets.6 Those barrels provide a substantial cushion. The agency notes IEA countries still retain more than one billion barrels of government-controlled emergency reserves.6
The reserve buffer gives the market room to absorb a supply shock. That is not the same as insulation from one. Public financing commitments aimed at expanding and diversifying critical mineral supply chains more than quadrupled between 2023 and 2025, reaching approximately $65 billion — the clearest sign yet that governments are treating mineral security as core energy security.6
Latin America sits at the centre of that calculation. The IEA assesses the region "is well positioned to play a larger role" in global mineral supply given its rich reserves.5 The agency estimates that if the region refined its own lithium, nickel, cobalt, graphite and rare earths, alongside two-thirds of its copper production, it could capture an extra $35 billion in economic value by 2035.5
The pathway to that prize is contested. Washington has struggled to translate its diplomatic weight in the Western Hemisphere into mineral supply chains that bypass Chinese predominance. Beijing's advantage does not stem solely from lower costs or faster infrastructure delivery; it comes from its ability to align financing, diplomacy, industrial policy and corporate activity behind long-term objectives. The US cannot simply exclude China from Latin America, particularly where Chinese financing is already embedded in regional infrastructure.3
Peru offers a concrete case. At Chancay, 65km north of Lima, boring machines are digging a tunnel beneath a sand hill beside the Pan-American highway, while Chinese-built trucks extend the port into deeper water. The $1.3bn first stage involves four quays.1 That is a port designed to move copper and other minerals into the Pacific trade lane, financed and built by Chinese capital.
China's position extends beyond minerals into the machinery of the transition itself. Chinese exports of photovoltaic cells surged 346 per cent year on year to reach US$39.96 million, while lithium-ion battery exports rose 20.8 per cent to US$780 million.4 "The whole world is now depending on China to supply their clean energy revolution," said Yang Biqing, a China analyst at London-based consultancy Enverus. "This is part of a longer trend, not just an immediate response to higher oil and gas prices," she said.4
Latin America is not waiting on Washington or Beijing to resolve that. Brazil is pushing its own experiment: an ethanol-powered grid engine, the world's first, launched as the country seeks to deploy its biomass wealth in novel applications.2 The Brazilian ethanol sector represents around $20 billion, and the grid engine is a test of whether a major agricultural producer can convert fuel ethanol capacity into power generation.2
A Middle East disruption that forces IEA members to draw down strategic reserves would tighten oil supply at the exact moment governments are trying to secure mineral supply chains.6 Both have become entangled, and Latin America is where they overlap most visibly.5
The $65 billion in public financing commitments is meaningful, but it remains a fraction of what the agency says is needed to secure diversified supply chains.6 The $6.5 trillion in goods trade exposed to Chinese export restrictions underlines the scale of exposure that remains.5 The next concrete signal will be whether the March 11 collective response is extended or expanded if Middle East tensions persist into the second half of the year.6