The Commodity Bull Market Just Entered a Dangerous New Phase

Commodities have staged a broad-based advance in recent months, with energy, metals and agricultural products all moving sharply higher. Two major measures of raw materials have climbed to notable levels: the Bloomberg Commodity Index has reached readings not seen since 2012, while the Quantix Commodity Index recorded a fresh high. Market watchers say the rally is no longer concentrated in oil alone but has broadened across the commodity complex.

In a new note, Bloomberg macro strategist Simon White highlighted how price gains since early August span multiple categories. European gas surged roughly 34% and gasoline about 22%, while industrial and precious metals — including zinc, copper, silver, platinum and gold — have also strengthened. Soft commodities such as sugar, cocoa and corn are up as well, and only a few futures markets (for example, hogs, cattle, nickel and orange juice) have declined over the period.

The rise in commodity costs is feeding through to input prices across industries. White pointed to the impact of constrained refining capacity linked to the Iran war, which has kept diesel and gasoline elevated and boosted transport costs. At the same time, escalation in the Russia-Ukraine conflict affecting the Black Sea and fears of a potent El Niño have added pressure to soft commodity supplies. Analysts also note tightening in critical-material flows from China, while some miners are positioning to undercut China’s dominant role in those markets.

Those developments raise questions for equities. White noted that on a 10-year annualised basis, recent commodity returns reached a level only once eclipsed since the 1970s — in 2008 — and historically high commodity prices have coincided with weaker stock performance. The current co-movement of rising stocks and rising commodity returns looks unusual, he said, and if commodity prices remain elevated the equity market could see further downside as corporate margins and household spending come under strain.