How Will The Iran Conflict Impact Commodities

UBS maintains a positive view on commodities as a diversification tool following the US-Iran deal to reopen the Strait of Hormuz. Despite the fading geopolitical risk premium, structural supply shortages in metals and potential energy inventory rebuilding support the asset class.

Key Takeaways

• 1.Commodities remain a useful portfolio diversifier amid geopolitical uncertainty.
• 2.Supply-demand imbalances in oil, copper, and aluminum support a constructive medium-term view.
• 3.A focus on active management is advised due to potential volatility and unique risks associated with physical or futures holdings.

Table of Contents

• Key message
• Volatility in commodities could remain elevated as the details of the US-Iran deal become clearer.
• The geopolitical risk premium should fade, but fundamentals look supportive.
• We continue to favor commodities, with a focus on active management.
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