July 26 (Reuters) - JPMorgan Chase & Co said it was considering a sale or a spin-off of its physical commodities business, including its holdings of commodities assets and its physical trading operations, as regulators increase scrutiny of Wall Street’s role in commodities.

The bank’s decision comes soon after the U.S. Federal Reserve said it was reviewing a 2003 decision that first allowed regulated banks to trade in physical commodity markets, and the U.S. Department of Justice began a probe into Wall Street’s role in the metals warehousing industry.

The concerns are not over banks’ trading in derivatives like corn futures or oil options, but whether they should be allowed to invest in infrastructure such as tankers and warehouses that can be integrated with their trading operations and whether they should be allowed to hold the underlying physical commodities.

JPMorgan’s decision to pursue strategic alternatives for the business came after an internal review, the bank said in a statement.

The bank said it will continue its traditional banking activities in commodity markets.

JPMorgan shares were down a percent at $55.97 in late afternoon trading on Friday.