- Surge in oil and gas prices takes CRB Commodities index to multi-year high
- Nineteen-strong raw materials benchmark has beaten equities since early 2020
- Middle Eastern war again stresses the importance of supply chain security
- Any return of inflation could further boost investor interest in hard assets
- Lengthy nature of commodity cycles and lead times in supply creation could mean this is just the beginning
“Covid-19 and lockdowns, the Russian invasion of Ukraine and now the war in the Middle East have all raised the importance of supply chain security as part of national security, particularly with regard to critical raw materials,” says AJ Bell investment director Russ Mould.
“The CRB Commodities index is bearing down on the all-time high reached back in 2008 as a result, and the combination of inflation, low levels of investment and that issue of supply security could yet mean this is just the start of a long, protracted upcycle for the price of hard assets, especially relative to paper ones.
“The CRB Commodities index is made up of 19 different raw materials, ranging from precious to industrial metals and from energy to agriculture. The index was already doing well and the latest war in the Middle East has taken the benchmark to the next level, thanks to sharp increases in the price of both oil and natural gas since the start of the conflict in late February.
“However, the CRB is still nowhere near its relative high compared to the FTSE All-World equity benchmark, to suggest that commodities may not yet be ‘expensive’ relative to stocks, even after a period of outperformance that dates back to early 2020 and the Covid-19 shock.
Source: LSEG Refinitiv data
“There are (at least) three arguments in favour of commodity price strength and further increases in the share prices of the companies that produce them.
“The first is that we may now be in a world of hot and cold wars over control of commodities and their supply.
“The second is the change in the macroeconomic environment. If the 2010s were all about low inflation, low growth, and low interest rates, then the 2020s may look very different, with higher inflation, higher nominal growth and higher interest rates, or at least more volatility in all three.
“That may favour hard assets and cyclical companies over paper assets and long-duration, growth ones, at least if the last period of real inflation (or stagflation) in the 1970s is anything like a reliable guide. It is possible that investors gravitate toward hard assets now, too, because of worries over what AI may do to digital, intangible assets and how hard assets may have a lower risk of immediate obsolescence.
“The third is how commodities cycles take a long time to play out because of how long it takes to build a mine or develop an oil field. They cannot be switched on and off like a lampshade and the FTSE 100’s six miners have not spent or invested heavily for some time. If commodity prices boom, it could take a long time for supply to catch up.
Source: Company accounts, Marketscreener, consensus analysts’ forecasts for Anglo America, Antofagasta, Endeavour Mining, Fresnillo, Glencore and Rio Tinto
“From the point of view of the UK stock market this is interesting, as the six miners form 8% of the FTSE 100’s total market capitalisation.
“That is in line with their percentage profit contribution in 2025, but below the 12% to 13% contribution that analysts expect the sextet to provide in 2026 and 2027, as if to suggest investors do not really trust the commodity price or profit forecasts being used.
Source: Company accounts, Marketscreener, consensus analysts’ forecasts for Anglo America, Antofagasta, Endeavour Mining, Fresnillo, Glencore and Rio Tinto
“That 8% market cap weighting is also in line with the miners’ forecast proportion of total FTSE 100 cash returns, in the form of dividends and share buybacks, across 2025 to 2027, when the range is expected to be 6% to 9%.
“Again, little sustained upside or downside in raw material prices seems to be priced in.
Source: Company accounts, Marketscreener, consensus analysts’ forecasts for Anglo America, Antofagasta, Endeavour Mining, Fresnillo, Glencore and Rio Tinto
“This may be because there are also three arguments against sustained commodity price strength and further increases in the share prices of the companies that produce them.
“First, the war in the Middle East could yet prove to be short-lived, so supply disruption may be temporary and not sustained. That in turn could help to put a lid on inflation and interest rates, and perhaps return us to the low-inflation, low-growth, low-interest-rate murk of the 2010s, which favoured long duration assets such as technology and biotechnology stocks and long-dated bonds.
“Second, the best cure for high prices is high prices, because they destroy demand and prompt the development of fresh supply. If fresh supply takes too long then alternatives may be considered instead, again to help keep costs down.
“Finally, the market switch from asset-light, digital businesses to heavy-asset, low-obsolescence (or HALO) stocks could be short lived if energy prices do stay high. This is because those asset-heavy business are energy intensive ones, including steel, airlines, engineering or… mining.
“Energy is a big chunk of a mine’s variable costs so a sustained surge in oil and gas could eat into a miner’s profits. Previous periods of high oil prices, sustained or otherwise, do not seem to have done much for the fortunes of the FTSE All-Share Industrial Metals and Mining sector.
Source: LSEG Refinitiv data
“Nor did Brent crude’s 2007 surge to an all-time high do much for sentiment toward the FTSE All-Share Precious Metals and Mining sector either, although the Great Financial Crisis and widespread asset liquidation may have had as much to do with that as the cost of fuelling a mine. Even so, gold’s failure to set new highs during this latest global crisis suggests it may be pausing for breath before its next move, be that up or down.
Source: LSEG Refinitiv data
“For the moment, the commodity sectors are still among the leaders within the FTSE 350 index in the year to date – a remarkable change from the technology, AI and software preference that has characterised markets for much of the last decade and beyond.
Source: LSEG Refinitiv data. *As of the close on 12 March 2026
“Any investor who buys into the view that a bad stock in a good sector will outperform a good stock in a bad sector will be keeping an eye on these trends, especially as more defensive and asset-intensive industry groupings are dominating the leaderboard right now.”
