Palladium futures slid again this week, extending a punishing selloff that has erased nearly ~10% in a month as Middle East conflict, rising inflation, and a hawkish Federal Reserve collide with the metal's deep dependence on a single industry.
Palladium futures slipped below $1,450 per ounce, touching their lowest level in five weeks amid a broader precious-metals selloff. The decline came as rising U.S. inflation, fueled by escalating geopolitical tensions and higher energy prices, strengthened expectations that the Fed will keep interest rates elevated for longer. For anyone holding palladium — directly or through mining equities — the message is clear: macro fear is winning.
• Oil Spikes Are Squeezing Palladium From Both Sides. Iran hit several ships in the Strait of Hormuz and set a UAE oil port ablaze, provoking the war's biggest escalation in weeks. Brent crude jumped more than 5%, and the U.S. dollar firmed. A stronger dollar makes palladium — priced in greenbacks — more expensive for overseas buyers, cutting demand. Simultaneously, rising energy prices have raised inflation fears and the possibility of higher U.S. rates , which makes non-yielding commodities like palladium less attractive compared with interest-bearing assets.
• The Fed Isn't Coming to the Rescue. Barclays joined a growing list of brokerages betting on no policy easing from the Fed this year. The central bank's most recent decision was its most divided since 1992, driven by deepening concerns about higher energy costs.
Markets now price a 29% chance of a rate hike by December — a nightmare scenario for metals that pay no interest.
• An 85% Auto Addiction Leaves No Room for Error. UBS recently cut its palladium forecast by $200/oz to $1,600, noting that autocatalyst demand accounts for 80–85% of consumption and warning the shift toward electric vehicles puts "a large segment of demand at risk."
Johnson Matthey's 2026 PGM report projects the palladium market will flip into a 214,000-ounce surplus — the first since 2012 , removing a key bullish pillar.
• Tight Supply May Not Be Tight Enough. Supply conditions remain relatively tight, with production disruptions in South Africa and uncertainty around Russian exports still affected by sanctions. But the three-month lease rate has crashed from ~19% to roughly 6% since January, while ETF holdings have shed nearly 300,000 ounces — both signs that the physical squeeze is loosening faster than bulls hoped.
The bottom line: palladium is caught in a vise between a war-driven inflation shock and a structural demand threat from electrification. Until either geopolitical risk fades or the Fed pivots, the path of least resistance points down.