How Will The Iran Conflict Impact Commodities

UBS advises maintaining an active, broad commodity allocation to hedge against inflation and systemic shocks amidst ongoing US-Iran geopolitical tensions. While short-term volatility remains high, fundamental supply-demand dynamics are seen as supportive over the medium term.

Key Takeaways

• 1.Negotiations between the US and Iran are the primary near-term driver of commodity markets.
• 2.Commodities serve as an effective portfolio diversifier and hedge against inflation and energy supply shocks.
• 3.Fundamental supply-demand imbalances in commodities like oil, gold, copper, and aluminum remain supportive for price stability or growth over the medium term.

Table of Contents

• How will the Iran conflict impact commodities?
• Key message
• 01 Volatility in commodities is likely to stay elevated in the near term.
• 02 The geopolitical risk premium should fade, but fundamentals look supportive.
• 03 We continue to favor commodities, with a focus on active management.
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