Diversify with broad commodities
We believe broad commodity exposure continues to offer diversification and growth potential. Commodities offer a valuable hedge against inflation and supply shocks, and their typically low correlation with equities and bonds makes them an effective portfolio diversifier, especially in periods of market stress. The combination of new supply disruptions in the Strait of Hormuz, elevated geopolitical risk, and structural demand trends supports the case for maintaining exposure.
Include an allocation to gold
Gold has been volatile since the start of the US-Iran conflict, with its perceived “safe-haven” appeal offset by investor liquidity needs, a stronger US dollar, and uncertainty over the US rate outlook. This pattern in gold mirrors previous geopolitical crises, where initial price spikes were followed by consolidation as markets stabilized. Looking forward, we think that central bank demand, continued diversification away from the US dollar, and concerns over global debt levels remain strong structural supports. We expect gold prices to trade toward USD 5,900/oz by the end of the year.
Energy
Severe supply constraints owing to restrictions in shipping through the Strait of Hormuz and uncertainty over a possible resolution are keeping energy prices elevated. Strategic reserve releases will only partially offset lost supply, and refined product prices are likely to remain elevated. We have raised our Brent crude forecasts to USD 100/bbl for end-June, USD 95/bbl for end-September, and USD 90/bbl for end-December 2026, with upside risks if disruptions worsen or persist. We are overweight energy in our Active Commodity Strategy.
Industrial metals
Industrial metals, especially copper, have benefited from secular demand drivers such as electrification, the energy transition, and the buildout of AI infrastructure. More recently, prices have remained resilient despite global growth worries. We view the temporary ceasefire between the US and Iran as an opportunity to increase exposure amid a risk-on backdrop. Ongoing supply constraints and sector-specific factors should support prices in the coming quarters. We are moderately overweight industrial metals in the CIO Active Commodity Strategy.
