From energy to metals: Why commodities still deserve a place in the portfolio
- The Hormuz shock has begun to unwind, but it reinforced the value of commodity exposure when inflation rises and growth weakens together.
- Oil remains important, though the stronger structural story is shifting toward power infrastructure, copper, aluminum, lithium and other metals linked to electrification and AI-related investment.
- Copper is increasingly a strategic rather than purely cyclical asset, with grid investment, defence, renewables and data centres supporting demand against a slow-moving supply base.
- Gold remains a targeted hedge for fiscal and institutional credibility risk, rather than a clean hedge for every inflationary episode.
Commodities still deserve a place in the portfolio
The Strait of Hormuz disruption is beginning to fade from the immediate market horizon, but the episode has left behind a useful reminder for investors: commodities still earn their place in a diversified portfolio, particularly when the usual equity and bond playbook stops working.
The recent energy shock was not an isolated event. It was the second major energy disruption in five years, following the 2022 gas crisis, and it underlined how quickly a supply shock can lift inflation, weaken growth and pressure both bonds and equities at the same time.
Oil has already begun to retreat as shipping through Hormuz normalizes, but the broader point remains. Commodities were among the few assets able to absorb the shock, with higher prices and strong oil roll yield helping broad commodity returns outpace equities and bonds year to date, albeit with considerably more volatility.
Author
Stephen Innes
SPI Asset Management
With more than 25 years of experience, Stephen has a deep-seated knowledge of G10 and Asian currency markets as well as precious metal and oil markets.
