Commodity prices could remain volatile through 2027 as geopolitical conflicts, disruptions to energy and agricultural supplies, and extreme weather risks threaten global markets, with crude oil, European natural gas and agricultural commodities facing significant upside risks, according to a recent report by Goldman Sachs.The bank said escalating attacks on shipping in the Strait of Hormuz, damage to energy infrastructure and the possibility of a colder-than-average European winter could drive energy prices sharply higher.However, its base-case forecast anticipates some moderation as supplies from the Middle East recover and the risk premium eases.“Our base case is that a further recovery in Mideast supply and a moderation in the risk premium reduce prices of Brent crude and European natural gas to $90/bbl and EUR70/MWh, respectively, by end-2026,” the report said.The bank warned that a prolonged disruption to Gulf oil supplies could push prices considerably higher in 2027.“Brent might rally to $140 in early 2027 and average around $125/bbl in 2027” if average Gulf output remains 5 million barrels per day below February 2026 levels, it said.European natural gas prices could also climb to 150 euros per megawatt-hour by the end of 2026 if liquefied natural gas (LNG) exports from the Persian Gulf remain depressed and winter temperatures turn substantially colder than average.
Middle East tensions keep oil supply risks in focus
Oil prices rose on Wednesday as escalating tensions in the Middle East heightened concerns over supply disruptions, while falling US crude and fuel inventories provided additional support to the market, according to Reuters.Brent crude futures climbed $1.61, or 1.5 per cent, to $110.40 per barrel, while US West Texas Intermediate (WTI) crude gained $1.45, or 1.5 per cent, to $99.27 per barrel as of 0630 GMT.The gains followed a decline in the previous session after Iranian President Masoud Pezeshkian discussed mediation efforts with Pakistan’s army chief in Tehran. However, uncertainty over a possible diplomatic breakthrough continued to weigh on market sentiment.“Oil prices have been having a bit of wild ride in the last couple of sessions,” Suvro Sarkar, head of energy research at DBS, told Reuters.He attributed the fluctuations to a combination of profit-taking, hopes of a Qatar- or Pakistan-brokered deal and concerns that any agreement remained distant, alongside continued drawdowns in US crude and petroleum product inventories.Maritime security risks have also intensified. Ship-tracking firm Kpler recorded at least 18 vessel attacks over the preceding two weeks. LSEG analysts warned that attacks on tankers had extended beyond the Strait of Hormuz into the Gulf of Oman, threatening regional oil loadings and ship-to-ship transfers.The Houthis also claimed responsibility for attacks on a Saudi Aramco site in Yanbu, the Shaybah oilfield and airports in Riyadh and Abha. Meanwhile, the death toll from a Houthi attack on Yemeni government forces rose to 73.
Agricultural markets face weather and supply pressures
Beyond energy, Goldman Sachs warned that agricultural commodities faced mounting risks from the Iran and Russia-Ukraine conflicts, potential restrictions on food exports and the prospect of a severe El Niño weather pattern.The bank said the agriculture component of the Bloomberg Commodity Index had risen 19 per cent year-on-year. Disruptions to fertiliser shipments through the Strait of Hormuz and grain exports through the Black Sea could add to costs and tighten supplies.“A strengthening El Niño has a greater than 81% probability of reaching ‘super’ El Niño conditions,” the report said, warning that the weather pattern could disrupt crop production through droughts and floods across key agricultural regions.The outlook comes amid wider concerns about the impact of geopolitical disruptions on global supply chains. In the United States, two Energy Department officials said they were working with refiners around the world to increase fuel production as a diesel shortage pushed prices higher, Reuters reported.Market sources citing data from the American Petroleum Institute said US crude inventories fell by 4.9 million barrels in the week ended October 16.
Copper and gold seen gaining in 2027
Goldman Sachs also expects industrial and precious metals to benefit from longer-term demand and supply trends.The bank forecast that copper prices would average $15,400 per tonne in 2027, supported by demand linked to electrification, data centres and artificial intelligence, alongside constrained mine supply.Gold prices, meanwhile, are expected to reach $5,400 per ounce by the end of 2027, driven by central-bank purchases and diversification, the report said.The Bloomberg Commodity Index has generated a total return of 36 per cent year-to-date, outperforming equities and bonds, according to Goldman Sachs.The bank’s outlook points to divergent possibilities for commodity markets: prices could moderate if Middle Eastern supplies recover, but prolonged energy disruptions, adverse weather and tighter agricultural supplies could sustain upward pressure through 2027.
