What is next for commodities

27 July 2026, 03:05 UTC Chief Investment Office GWM Investment Research

What is next for commodities? UBS House View Briefcase Giovanni Staunovo, Strategist, UBS Switzerland AG; Daisy Tseng, Strategist, UBS AG Singapore Branch

Key message New this week Renewed tensions in the Middle East strengthen the case for broad Brent crude oil hit USD 100/bbl last week for the commodity exposure as both a source of return and an inflation first time in two months, as Houthi attacks in the hedge. Energy can help buffer portfolios if shipping or production Red Sea disrupted another vital waterway for disruptions persist, industrial metals should stay supported by global energy supplies. investment in AI and electrification. Agricultural commodities have upside potential given El Niño-related risks, while gold remains a One liner useful strategic diversifier. We favor active management because commodity leadership is likely to rotate as geopolitical conditions, Broad commodity exposure can enhance inventories, and demand expectations change. portfolio diversification, improve portfolios' inflation resilience, and provide access to structural demand trends.

01 Renewed tensions in the Middle East highlight the case for broad commodity exposure. Did you know? • Attacks from the Iran-aligned Houthis opened a new front in the US-Iran war, disrupting another vital waterway for global energy • Investors can access commodities through supplies. diversified indices, exchange-traded funds (ETFs), exchange-traded commodities (ETCs), • Brent crude oil has risen nearly 33% so far in July, with the latest or structured investments. data showing a decline in loading activity within the Persian Gulf, and an increase in the volume of stranded oil. • From January 1999 through May 2026, commodities showed a correlation of 0.44 • Broad commodities have also recovered from their late June lows, with global equities and -0.04 with US bonds, based on the UBS CMCI Composite total return index (USD), with supporting their role as a differentiated return year-to-date gains of 24.5%. source.

02 But fundamentals are also supportive for commodities. • For investors with substantial allocations and significant unrealized profits in gold, • AI infrastructure and electrification underpin the long-term outlook broadening commodity exposure to include of industrial metals such as copper. copper, aluminum, and agricultural assets can help diversify sources of future return, in our • Forecasts point to an 81% probability that the current El Niño view. 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. Investment view • Gold should continue to be supported by central bank demand and Commodities will continue to play a prominent reserve diversification despite more challenging near-term outlook. role in portfolios, in our view, offering diversification amid supply-demand imbalances,

03 So, we continue to favor commodities, with a focus on active management. geopolitical risks, and the global energy transition. We like broad commodity exposure, • Commodities have historically shown low correlations with equities with an active approach amid still elevated and bonds, making them a useful portfolio diversifier. volatility.

• 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 must be aware of unique risks such as price swings and costs associated with futures or physical holdings.

This report has been prepared by UBS Switzerland AG and UBS AG Singapore Branch. Please see important disclaimers and disclosures that begin on page 3.

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