Commodity Market Shaped by Relay of Metals, Energy, and El Niño

The commodity market in 2027 is expected to be shaped by several key themes, according to Mobeen Tahir, Director of Macroeconomic Research & Tactical Solutions at WisdomTree. The market can be visualized as a relay race, with different commodities taking turns carrying the baton.

The race began with gold and silver sprinting off first, hitting record highs in January. Oil prices then surged due to the Iran conflict, draining inventories that had built up over the past year. Metals such as copper picked up the pace next, driven by artificial intelligence (AI) infrastructure and defence spending, which have created supply chain tightness.

Agriculture is now reaching for the baton, with El Niño returning just as fertiliser supply chains remain under a cloud of uncertainty. The return of El Niño could peak between November 2026 and February 2027, posing risks to food prices, particularly in South and Southeast Asia.

Tahir notes that while markets are still hoping for durable peace, depleted stocks argue for a structurally higher risk premium across energy markets for the time being. The US politics also play a significant role in shaping metals supply, with household energy bills having climbed sharply since 2021, influencing the debate ahead of the midterms.

The longer-term structural story still has metals as its protagonists, with deep supply deficits expected for lithium, cobalt, nickel, rare earths, and copper over the next two decades. The buildout of AI infrastructure is also driving up demand for these metals, which could lead to higher estimates of their usage.

Tahir suggests that a broad commodity allocation still makes sense, as fossil fuels are not disappearing quickly, with oil still supplying around a third of global energy in 2025. Commodity indices have also improved, returning over 330% across the same period since 2006, making them an attractive option for investors.