Key takeaways:
- Even with a provisional peace deal and an assumption of a timely reopening of the Strait of Hormuz, the infrastructure damage, low oil and gas inventories and the time it will take to re-establish global energy supply chains means we may need to prepare for at least several months of further energy shortages and price volatility
- Metals are navigating a narrow path between an improving recovery driven by cyclical and secular factors and a potential stagflationary environment driven by oil prices
- Renewable energy has emerged as a structural winner from the Iran conflict as governments increasingly prioritise energy security over cost of carbon alone
The first half of 2026 has highlighted just how fragile the global supply chain really is, and how global economies are barrelling toward a new world order. In the second half, the dual conflicting scenarios of growth and stagflation are easy to imagine, with the range of potential outcomes hinging on whether the US-Iran peace deal will hold and how quickly affected infrastructure and supply chains can normalise.
We are in a new commodities paradigm, one where geopolitical and geoeconomic developments create both cyclical and structural dislocations and investment opportunities.
Energy
Energy has been dominated by the US-Iran conflict as global oil balances quickly went from an oversupplied market to one marred by physical shortages within weeks. While oil in the ground remains plentiful, the bad news is that infrastructure and logistics issues have removed 15-20% of global supply which cannot be restored at the flick of a switch.
At the time of writing, a provisional peace deal had just been announced, but many details will still need to be ironed out. Even if the Strait of Hormuz were to open as soon as this week or next week, we still expect near-to-mid-term physical shortages. The estimate is that for every one day of Hormuz outage, the global energy supply chain needs three days to normalise.
Bearing in mind that we had more than three months of the Strait’s closure, we could be facing at least six months of disrupted supply chains, even into early 2027.
Figure 1: Daily vessel crossings through the Strait of Hormuz, 2026 versus 2021-2025 range
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Source: Bloomberg, ticker TRHBTKCD, as at 28 May 2026.
Given the downward trajectory of global inventories, we are seeing limited signs of demand rationalisation. US road and air demand remains relatively robust despite the rise in gasoline and jet fuel prices. Global air travel is near highs as well, even though Asia and Europe remain much more exposed than the US to Middle East supply disruptions.
Meanwhile, global inventory balances continue to plummet and will likely draw down even more in the coming months. This is against a demand backdrop that is just entering the seasonally strong period for oil products.
The second half of 2026 could spell continued physical shortages and price volatility. There are some signs of supply chains adjusting, with increased tanker flow to the US and oil rerouted through the Red Sea, but simply not enough barrels to fully offset the Strait of Hormuz outages.
What has driven the relatively subdued oil price gains, given the initial panic when the price hit the psychological US$100 a barrel mark? The answer lies in increased non-OPEC exports. US crude oil and product exports have spiked, and China has reversed last year's stockpiling. However, both are temporary solutions and can only bridge the global supply gap for a limited time.
We could also see a dire situation developing in the global natural gas market. Like oil, the price reaction for natural gas has been more muted than many of us expected, for several reasons. Some Asian liquefied natural gas is being diverted to Europe, and the European power market has diversified to a more resilient grid since the Russia-Ukraine conflict.
Seasonally, natural gas is in the injection season, where heating demand has yet to pick up. Yet the previous global glut is now projected to give way to a balanced to tight market for the next few years. Cold weather can easily spark another run in natural gas prices, particularly at the end of the build season in November when winter demand starts kicking in. This is another situation to watch, as it could spell an energy crisis for power generation into the winter months.
Metals
Metals are riding a precarious line between an improving recovery driven by cyclical and secular factors and a stagflationary environment driven by oil prices. The rise of geopolitical fragmentation is creating a global growth imperative, driving long-term trends including decarbonisation, deglobalisation, infrastructure, defence and artificial intelligence buildout.
While global purchasing managers' indices (PMIs) have been showing continued acceleration, future growth can easily be derailed by a future supply chain disruptions or a slower than expected normalisation of global supply chains. There will be nuances to navigate in the second half of the year, but we ultimately believe that volatility could be used as an opportunity to add exposure.
Figure 2: JPMorgan Global Manufacturing PMI
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Source: Bloomberg, JPMorgan Global Manufacturing Purchasing Managers' Index, as at 30 April 2026. A reading above 50 indicates expansion.
Cyclical demand for metals such as copper is sensitive to short-term interest rate policies, and there have been relatively few supply disruptions, aside from sulfuric acid used in the refining process. Aluminium, however, is highly impacted by near-term disruptions in global supply and is leveraged to potential improvement in both cyclical and structural demand. The weaponisation of critical minerals will continue to be an overhang, encompassing a wide range of materials and end uses, from metals used in military armament restocking to the magnets that underpin modern warfare.
The longer-term picture remains one where supply is simply not keeping up with the cyclical and structural drivers of demand. In the case of precious metals, the second half of the year will likely remain a tug of war between hawkish and dovish views on Federal Reserve (Fed) rate policy. The appointment of a new Fed chairman will only increase speculation, but we believe Fed policy will ultimately lean relatively dovish, as this inflation episode is supply-driven and growth remains a pressing need in the new geopolitical paradigm.
The longer-term secular drivers behind the broader de-dollarisation theme are stronger than ever. One of the unintended consequences of the Iran conflict is to hasten diversification away from the US dollar, with the rise of the petro-yuan and alternative forms of payment. In this environment, gold has a distinct role as a universal hard asset reserve currency.
Renewable energy
Global energy policy is undergoing a structural shift. In recent years, the guiding question moved from ‘what is the cheapest molecule?’ to ‘what is the cleanest molecule?’ to, now, ‘what is the most secure molecule?’.
The Iran conflict highlights that wars of attrition are disproportionate in nature, as it is far easier to shut things down than to keep them open. Global energy policy will shift to incorporate scenarios where the Middle East transitions into a prolonged period of instability, and where unobstructed flow of energy and its associated supply chains are increasingly called into question.
Within this emerging framework, renewable energy stands out as a structural winner in the new energy calculus.
Figure 3: Global final energy consumption by fuel type, share of total (%), 2000–2050, net zero scenario
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Source: BloombergNEF, as at 28 May 2026.
As technology and manufacturing efficiencies have made renewables a viable source of power, the Iran conflict has underscored the strategic advantages of a diversified, less import-reliant energy model. Winners will be the players that can leverage both technology and supply chain manufacturing dominance. Regional champions will also emerge as sovereign policies move to protect and incentivise domestic capacity. While fossil fuels will continue to be an integral part of the overall energy picture, the security advantages of renewable energy will continue to drive it toward becoming the fastest-growing form of energy generation.
Parting thoughts
The second half of 2026 will likely be defined by the pace of infrastructure repair and the durability of the current diplomatic efforts. While the reopening of the Strait of Hormuz is a necessary step toward stabilisation, the depletion of global inventories suggests that energy market volatility could remain elevated through the winter months. The broader shift in policy toward energy security provides a persistent backdrop for renewable energy growth and domestic resource development. Investors need to be aware of and be able to navigate these structural shifts in commodity markets.
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