Commodity markets are facing a combination of geopolitical, supply and weather risks that could support prices across energy, metals and agriculture through 2027, according to WisdomTree.
Mobeen Tahir, director of macroeconomic research and tactical solutions at WisdomTree, said the latest disruption to oil markets had reduced inventories and left the energy market with less of a buffer against further shocks.
The conflict between the US and Iran disrupted the Strait of Hormuz and knocked out a major LNG facility in Qatar. Oil prices roughly doubled at the peak of the disruption, while inventories that had built up over the previous year have since been drawn down.
The Strait also handles around a third of the world’s traded fertiliser, adding to the risk of higher food prices if disruption persists.
“Depleted stocks argue for a structurally higher risk premium across energy markets for a while yet,” Tahir said.
Geopolitics drives portfolio rethink, says Schroders
He said the longer-term investment case for metals remained supported by expected supply deficits across lithium, cobalt, nickel, rare earths and copper.
Research from Wood Mackenzie and Morgan Stanley cited by WisdomTree points to significant potential shortages over the next two decades, with lithium potentially facing an 85% supply deficit by 2045.
China continues to dominate processing capacity for many strategic metals, encouraging the US, EU and Japan to secure supplies through government-backed investment and supply agreements.
Copper has also highlighted the potential for tariff policy to increase volatility in physical markets, with prices rising sharply before reversing as US trade plans changed.
WisdomTree also expects inflationary pressures to remain higher than during much of the past decade, partly because of energy costs and the resources being absorbed by the AI infrastructure buildout.
Tahir said AI could initially prove inflationary as it increases demand for power, equipment and labour before productivity gains become disinflationary.
Gold reached a record above $5,595 an ounce earlier this year before correcting sharply. WisdomTree views the pullback as a reset within the broader rally, with its model pointing to around $4,563 an ounce by Q2 2027.
The growth of data centres, electric vehicles and other electricity-intensive infrastructure is expected to increase demand for copper and other industrial metals.
Defence spending is adding another source of demand. Global military expenditure reached a record $2.9tn in 2025, while defence equipment also requires significant quantities of metals including copper, aluminium, silver, lithium and uranium.
Agricultural commodities face a separate supply risk from the return of El Niño.
WisdomTree said the weather pattern could peak between November 2026 and February 2027, with agricultural effects typically lagging the peak by six to 12 months.
South and Southeast Asia face risks to rice, sugar and coffee production, while Australian wheat output could fall by around 9 million tonnes. West African cocoa could also face flooding risks against an already tight market.
Broad commodity exposure
Tahir argued that the range of potential supply shocks supports maintaining exposure across the commodity complex rather than relying on individual commodities.
Oil and gas remain significant components of global energy demand, while industrial metals face structural demand from electrification, AI infrastructure and defence.
Precious metals provide exposure to inflation and safe-haven demand, while agricultural commodities add another source of diversification.
WisdomTree also highlighted the potential difference between traditional commodity indices and newer strategies that incorporate factors such as market tightening and momentum.
Its third-generation index has returned more than 330% since 2006, compared with 2.7% for the Bloomberg Commodity Index over the same period, although the former figure includes backtested data.
Leave a comment