Wars and weather redraw the map of returns in commodity markets
Analysis showed that commodity markets enter the second half of the year amid a more uncertain landscape, dominated by Supplies, geopolitical tensions, weather fluctuations, and monetary policy changes.
This comes at a time when Energyand agriculture gains, while Precious metals Searching for a new direction under the pressure of the dollar and interest rates.
The report said: As we pass the middle of July and enter the holiday season, many traders, investors and analysts are staying away from their offices for a few weeks, and this seems an ideal time to evaluate the situation of commodity markets after an eventful first half of the year.
Bloomberg Index
The Bloomberg Commodity Total Return Index recorded gains amounting to 5.3% from the beginning of the month until now, This offset more than half of the sharp decline witnessed in June.
He explained that, however, this recovery was narrow in scope, as the majority of the gains flowed from the energy and agricultural sectors, specifically grains, coffee and cocoa.
The index rose by about 20% since the beginning of the current year, and approximately 29% during the past twelve months.
While metals were the main driver of last year’s rise, the performance in 2026 It was dominated by energy following repeated disruptions to production and trade flows coming from the Middle East.
According to the analysis, the new escalation of hostilities between the United States and Iran led to the disruption of shipments passing through the Strait of Hormuz once again.
According to the analysis, the impact of this slowdown resulting from the escalation was not limited to crude oil, but extended to include refined fuels, liquefied natural gas, minerals, and petrochemical products.
/>He stated that, accordingly, wars and weather conditions still impose a noticeable control on the basic commodities sector. High fuel costs are keeping inflation fears alive, increasing the possibility that central banks will be forced to maintain or perhaps tighten monetary policy restrictive.
The analysis stated that this situation created headwinds for non-yielding assets such as gold and silver, while providing support for commodities directly exposed to physical supply shortages.
Energy Dominance
It added that with the exception of natural gas, the Bloomberg Energy Total Return Index achieved gains of about 54% since the beginning of the year.
Brent and West Texas Intermediate crude oil are both up nearly 65%, while refined products recorded stronger returns; European gas oil (diesel) jumped by more than 130% this year, while ultra-low sulfur diesel in the United States gained 124%.
Gasoline achieved a strong performance that reflects low inventories, refinery disruptions, and the impact of rising crude oil and shipping costs.
Natural gas remains the most prominent exception; It has declined on a total return basis by approximately 20% since the beginning of the year, and by more than 41% over the past year. Abundant domestic supplies, storage levels exceeding normal seasonal rates, and periods of reduced LNG export capacity continue to exert persistent downward pressure on the US market.
The analysis indicated that the structure of the forward price curve played a crucial role in the discrepancy between spot returns and total returns. The curves for crude oil and refined fuels show a clear case of forward decline, or what is known as the inverse market structure (backorder), which means trading the closest-maturity futures contracts at a price premium (higher price) compared to the deferred contracts.
He pointed out that as a result, investors who rotate their buying positions from an expired contract to a lower-priced deferred contract obtain a positive rolling return for contract prices.
The implied holding return is for a period The 12-month rate is about 10% for Brent and WTI, while exceeding 20% for many refined products.
The positive holding yield has provided tremendous momentum for passive investors in long positions, helping overall returns clearly outperform spot price movements for futures contracts.
In contrast, natural gas continues to trade according to a natural market structure (contango).
He explained that this means that investors are generally selling. They replace the expiring contract with a more expensive forward contract, generating a negative contract rollover even when spot prices remain little changed.
3 Risks Facing Agriculture
The agriculture sector has gained 11.4% since the beginning of the year, with the grain and soybean complex up 11%.
The sector was also one of the best performing sectors in July, rising 8% as geopolitical and weather risks returned to the forefront.
/>Wheat led the latest wave of the rise, while wheat futures contracts on the Paris, Chicago, and Kansas City exchanges jumped by about 14% or more, supported by renewed attacks on shipping infrastructure in the Black Sea, scarcity of exportable supplies, and concerns about crop conditions in parts of Europe.
According to the analysis, this situation differs from what happened in 2022, when the escalation of the war coincided with the beginning of the growing season in the northern hemisphere and raised fears of loss of production and disruption of exports. Together.
He stated that the current danger is mainly focused on logistics and the availability of export supplies. However, any prolonged disruption may keep the geopolitical risk premium as an integral part of wheat prices.
According to the analysis, it adds to the intensification of the phenomenon "El Niño" More fluctuations during the second half of the year. However, their impact will not necessarily be the same; Some producing regions may suffer from heat waves, drought, or heavy rains, while other regions may benefit from improved growing conditions.
The most likely result is increased regional variation and increased severity of fluctuations, rather than an automatic jump in the general level of food prices.
The analysis said: "The importance of energy prices also arises from the perspective of biofuels; While the prices of corn, soybean oil and sugar have become increasingly linked to the economics of gasoline and diesel through the production of ethanol and renewable diesel"He added: The continuation of fuel prices at high levels for a long period may enhance demand for selected agricultural inputs.
Precious Metals
The analysis indicated that precious metals remain one of the weakest performing sectors in 2026, while the Bloomberg Precious Metals Index has fallen by 9.5% since the beginning of the year.
Gold declined by 8.2%, while the prices of silver, platinum and palladium fell by more than 20%.
This weakness recorded since the beginning of the year comes after strong gains achieved in the previous year. Gold is still up 18% over the past 12 months, while silver has gained more than 44%, illustrating the scale of the previous price boom and the correction that followed.
Gold and silver are now struggling to determine a clear direction as investors balance conflicting macroeconomic forces.
Recent readings of the CPI and Producer Price Index in the United States, which were less sharp, helped support prices briefly by reducing expectations for monetary tightening. Imminent by the Federal Reserve.
He explained that this rise quickly dissipated after new rises in oil prices and the recent US strikes against Iran, which revived fears that high energy costs will fuel inflation again.
High oil prices traditionally create downward pressure on precious metals by raising inflation expectations, supporting Treasury yields, and potentially enhancing the strength of the dollar.
This increases the opportunity cost of holding non-existent assets. Return generating. At the same time, any prolonged energy shock could weaken global growth, exacerbate financial pressures, and renew concerns about debt sustainability and currency decline, all of which are developments that ultimately favor gold.
The market’s inability to choose between these two scenarios explains the absence of a clear trend that has dominated recently.
Trend Signals
According to the analysis, long-term trend signals are still generally supportive in the energy, industrial metals, grains, and livestock sectors.
He reported that, based on the relationship between the 50-day and 200-day moving averages, more than half of the commodities tracked are experiencing transactions that show a continuation of their positive long-term trend.
The strongest signals are still concentrated in refined fuels, selected industrial metals, wheat, soybean products, and livestock.
On the other hand, precious metals continue to trade below their long-term upward trend levels following the sharp correction they witnessed earlier this year.
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He added that the short-term picture seems less convincing; The relationship between the 10-day and 100-day moving averages was generally divided between positive and negative signs.
According to the analysis, the weakness seen in crude oil – as a result of the recent decline that preceded the current rebound – and in precious metals, was compensated by improved momentum in the prices of grains, coffee, cocoa, and selected livestock contracts.
This discrepancy indicates that the commodity sector is receiving the second half of the year without a single headline dominating all markets. Geopolitical developments, weather conditions, monetary policy, and the structure of the forward price curve will remain critical factors, but their impact will vary significantly from sector to sector.
The analysis prepared by Ole Hansen, head of commodities strategy at Saxo Bank, stated that, accordingly, the broad rise in commodities may continue, but performance is likely to remain selective.
He noted that in such an environment, it will be important to understand the extent of spot markets, the timing structure of prices, and the risks Regional supplies are equally important as forecasting the direction of spot prices.
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