Middle East tensions are impacting energy markets.
European natural gas prices (Dutch TTF futures) hit EUR 84.5 per megawatt-hour on 14 September, the highest level since December 2022.
Brent crude oil prices remain volatile, trading at around USD 102/bbl at the time of writing.
Military exchanges between the US and Iran are continuing, with both sides recently targeting oil tankers.
But fundamentals are supportive for broad commodities.
AI infrastructure and electrification underpin the long-term outlook for industrial metals like copper.
Forecasts suggest a near 80% probability this year's El Niño reaches "very strong" or "super" rating by year-end and a 97% chance that it persists into 2027.
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
G7 countries on 2 October agreed to release 100 million barrels of crude oil and diesel from emergency reserves, and pledged to avoid energy export restrictions, following reported US pressure to help ease global fuel supply concern.
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 should continue to play a prominent role in portfolios, 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.
