COMMODITY OVERVIEW
Geopolitical supply risk dominated commodities, with the potential closure of the Strait of Hormuz driving a sharp risk premium in crude oil and aluminum. The move was partially offset by a 9.07 million-barrel U.S. crude inventory build, but historically low aluminum inventories, constrained shipping, and fertilizer-input shortages kept the broader commodity complex supported. China and electrification demand continued to underpin copper, while silver underperformed despite the geopolitical backdrop.
ENERGY
The Strait of Hormuz remained the primary energy-market catalyst. Iran’s threat to restrict the waterway, the collapse of U.S.-Iran negotiations, reduced Iranian crude exports, and the absence of VLCC loadings from Kharg Island have pushed the market to price a prolonged disruption. Brent approached $87/bbl, while WTI traded above $83/bbl, with a move through $100/bbl viewed as a credible risk if the chokepoint is effectively closed.
Physical logistics are tightening rapidly. Tankers rerouting under military protection have helped maintain some flows, but shipping rates above $500,000 per day signal extreme scarcity of vessel capacity and elevated war-risk costs. ADNOC’s purchase of 11 VLCCs and plans for a Hormuz-avoiding LNG terminal in Fujairah reinforce the longer-term shift toward diversified energy infrastructure.
The immediate bearish counterpoint is the 9.07 million-barrel U.S. crude inventory build reported by the API, particularly the increase at Cushing. That data challenges the assumption of uniformly tight balances and could pressure WTI and USO.US if confirmed by official data or followed by weaker demand indicators. The divergence between official claims of roughly 9 million barrels per day moving through Hormuz and independent estimates near 5 million barrels per day is also amplifying headline volatility.
Natural gas has no direct supply shock from Hormuz in the available data. However, AI and data-center demand is driving a structural expansion in gas-fired generation, pipeline compression, and on-site power capacity. Natural gas is gaining strategic importance as a flexible bridge fuel, although the news provides no direct directional signal for UNG.US.
METALS
Industrial Metals
Aluminum is in a structural supply-squeeze narrative. LME inventories have fallen to their lowest level since 1990, while Norsk Hydro warned of a potential global deficit exceeding 900,000 tons. A prolonged Hormuz disruption threatens Middle Eastern production and exports, which account for roughly 10% of global aluminum output. Incremental supply from China and Indonesia is insufficient to offset that risk.
The U.S. market is receiving additional support from Section 232 tariffs and the potential restart of domestic smelting capacity. Century Aluminum’s proposed $2 billion Oklahoma smelter investment could increase volumes materially, but the project remains a longer-term catalyst rather than an immediate supply response. The near-term aluminum bias remains bullish while inventories stay at historic lows and regional logistics remain impaired.
Copper continues to trade on electrification and supply scarcity. Prices near $6.60/lb, up 48.2% year over year, are supporting strong earnings and aggressive investment plans at Southern Copper. India’s effort to secure Chilean concentrate from Codelco highlights rising competition for feedstock. Exploration results, including reported surface grades of up to 28% at Domestic Metals’ Smart Creek project, are highly bullish for exploration sentiment but remain unconfirmed until assays are released.
Steel news was constructive for North American producers but mixed for Europe. Ampco-Pittsburgh reported stronger margins and backlog growth, supported by tariff protection, higher domestic mill utilization, Navy demand, and power-generation equipment tied to data-center expansion. Salzgitter maintained profitability despite weaker European demand through cost savings and Aurubis earnings, while its €900 million HKM investment accelerates the shift toward electric-arc and lower-carbon steel production.
Precious Metals
Gold retains a geopolitical and inflation hedge, supported by Middle East tensions and expectations that monetary-policy assumptions could become less restrictive. Barrick’s strategic expansion of its Nevada Gold Mines position, increased capital returns, and planned IPO of North American assets could improve sentiment toward gold equities, although the company’s earnings miss triggered an 8% share-price decline. The episode reinforces that operational delivery and guidance remain critical even in a strong gold-price environment.
Silver underperformed the broader safe-haven complex, falling about 2.7%, as profit-taking and hawkish-rate sensitivity outweighed geopolitical support. Its higher industrial and speculative exposure makes it more vulnerable than gold to shifts in real rates and risk appetite. China’s 62.5% year-on-year increase in silver-bearing ore imports supports the long-term industrial case, while CME’s planned 24/7 trading for 100-ounce silver futures in September 2026 should improve market access and liquidity over time.
AGRICULTURE
Canadian grain logistics were the main agricultural development. Canadian National Railway moved a record 33.8 million metric tonnes of Western Canadian grain during the 2025–26 crop year, exceeding the prior record of 31.2 MMT. The result indicates strong exportable supply and unusually reliable rail execution, which should support North American competitiveness and reduce near-term logistics risk for wheat, canola, and barley.
The record throughput is not itself a bearish demand signal, but sustained rail efficiency could ease regional supply tightness and improve export availability. The key risk is whether CN can maintain volumes through the next crop year amid weather volatility and infrastructure strain.
MACRO DRIVERS
- Geopolitical risk: The U.S.-Iran confrontation and potential Hormuz closure are lifting crude, aluminum, fertilizer inputs, tanker rates, and broader inflation expectations.
- Dollar and rates: Receding expectations for further U.S. rate hikes are supporting base metals, while renewed hawkish expectations are weighing on silver and other high-beta assets.
- China and electrification: Copper demand remains anchored by green infrastructure, EVs, and industrial investment; higher Chinese silver-bearing ore imports reinforce industrial-metal demand.
- Inflation transmission: Oil above $80/bbl, sulfur above $1,000/ton, and elevated shipping costs raise the risk of renewed energy and input-cost inflation.
POSITIONING IDEAS
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Bullish:
- Aluminum / LME aluminum: Long bias is supported by historic-low inventories, a potential Middle Eastern supply disruption, and Norsk Hydro’s projected deficit of more than 900,000 tons.
- Copper / HG: Structural electrification demand, strong pricing, competition for concentrate, and limited near-term mine-supply growth support a bullish medium-term bias.
- Brent crude / CO1: Maintain upside exposure while Hormuz remains at risk, Iranian exports are impaired, and tanker rerouting costs remain extreme. Options are preferable to outright length given the inventory-build risk.
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Bearish:
- WTI / CL1 and USO.US: Short-term downside risk comes from the 9.07 million-barrel U.S. inventory build, possible demand weakness, and the prospect that geopolitical premium has become excessive. Any de-escalation or confirmation of restored flows could trigger a sharp reversal.
- Silver / SI: Near-term bearish bias is justified by the 2.7% reversal, sensitivity to real rates, and profit-taking despite supportive industrial demand.
- Pan American Silver: Equity exposure faces margin risk from elevated all-in sustaining costs, inventory overhang, and delayed gold output, even if silver prices remain favorable.