Middle East tensions are impacting energy markets.
European natural gas prices (Dutch TTF futures) hit a new three-year high of nearly EUR 74 per megawatt-hour on 7 September amid constrained energy supplies due to the Middle East conflict.
Brent crude oil prices remain volatile, trading at around USD 97/bbl at the time of writing.
Military exchanges between the US and Iran are worsening, with both sides targeting oil tankers over the weekend of 5 September.
But fundamentals are supportive for broad commodities.
AI infrastructure and electrification underpin the long-term outlook for industrial metals such as copper.
Forecasts point to a roughly 80% probability that the current El Niño episode develops into a "very strong" or "super" El Niño by the end of the year and a 97% chance that the conditions persist into next year.
Gold should remain supported by central bank demand and reserve diversification despite a more challenging near-term outlook.
So, we continue to favor commodities, with a focus on active management.
Commodities have historically shown low correlations with equities and bonds, making them a useful portfolio diversifier.
A diversified, regularly rebalanced exposure is the simplest way to capture most of the asset class’s benefits, while selective tilts can add value when conviction is high.
However, investors need to be aware of unique risks such as price swings and costs associated with futures or physical holdings.
New this week
On 7 September, Brent rose to near six-week highs after US and Iranian strikes on vessels raised concerns over Middle East supply disruptions.
Did you know?
- Investors can access commodities through diversified indices, exchange-traded funds (ETFs), exchange-traded commodities (ETCs), or structured investments.
- From January 1999 through May 2026, commodities showed a correlation of 0.44 with global equities and -0.04 with US bonds, supporting their role as a differentiated return source.
- For investors with substantial allocations and significant unrealized profits in gold, broadening commodity exposure to include copper, aluminum, and agricultural assets can help diversify sources of future returns, in our view.
Investment view
Commodities will continue to play a prominent role in portfolios, in our view, offering diversification amid supply-demand imbalances, geopolitical risks, and the global energy transition. We like broad commodity exposure, with an active approach amid still elevated volatility.
