Commodity market volatility and investment in artificial intelligence infrastructure are renewing demand for documentary letters of credit, according to Trade Finance Global. The outlet reported that the market reached $4.81 billion in 2026, with a compound annual growth rate of 5.3%, as companies sought bank-backed protection against payment risks.
Frederick Rugginz, J.P. Morgan’s Global Head of Financial Institutions Trade Sales, told the publication that businesses were using letters of credit to manage limits on their exposure to counterparties. Speaking at Sibos 2026 in Miami, he described demand extending beyond conventional commodity transactions into AI capital expenditure, including data centre financing and power-related letters of credit.
Middle East conflict is affecting both the size and number of transactions. Trade Finance Global reported that escalation provisions linked to oil and gas benchmarks can increase the value of letters of credit when energy prices rise. Rugginz said that, since the Iran conflict began, letters of credit to the Middle East had fallen by 7% while their value had increased by 15%. He also said banks prioritised food and energy during disruption, helping sustain essential commodity flows despite heightened payment risks.
Latin America is another source of demand as tariff tensions between China and the US reshape trading relationships. According to the report, exports from Brazil and Argentina have gained a price advantage over goods affected by tariffs. The region’s exports were valued at $1.39 trillion in 2024, and documentary trade finance is helping buyers and suppliers establish confidence as they enter unfamiliar markets.
The resurgence is also putting pressure on document-heavy banking processes. Rugginz said AI could assist with preparing and drafting standardised letters of credit, reducing the workload associated with routine tasks. Experienced staff nevertheless remain responsible for reviewing AI-assisted material and checking it against internal policies.
That oversight is particularly important as banks face the retirement of staff with extensive operational knowledge. Rugginz argued that automation could give less experienced employees more time for careful checks and training, supporting the transfer of expertise rather than removing the need for human judgement.