Two Wars and a Strong El Niño: HSBC Says Global Commodities Have Entered a Super Bull Market

The Iran war, the Russia-Ukraine conflict, and a strong El Niño phenomenon continue to disrupt supply, while AI investment and energy transition are boosting demand. HSBC states that as inventory buffers are rapidly depleting, commodity markets have entered a 'super squeeze' phase. Its statistical model indicates that global commodities are now in a 'super bull market,' typically characterized by prolonged price increases.

Paul Bloxham, HSBC's Chief Global Commodities Economist, stated in a recent report that multiple supply shocks and structural demand growth are jointly pushing up price levels, with risks of further commodity price increases continuing to accumulate. As a result, HSBC has raised its average commodity price increase forecast for 2026 from 16% to 22%, and its 2027 forecast has also been revised upward by 14% compared to previous estimates.

Markets have already begun reflecting supply tightness. London copper futures briefly surpassed $14,700 per ton, while Brent crude oil futures returned to above $104 per barrel. The Bloomberg Commodity Index has risen 18% year-to-date and is up 24% compared to the same period last year. HSBC's pure statistical model, COCCLES, shows that commodity markets have entered a super bull market phase.

Six months after the outbreak of the Middle East conflict, it remains one of the most critical variables for commodity markets. The Strait of Hormuz is currently effectively closed, with uncertainty surrounding its reopening timeline and conditions. Houthi attacks on ships in the Red Sea and Saudi Arabia are further disrupting shipping through the Bab el-Mandeb Strait, increasing transportation costs and supply chain risks.

The Russia-Ukraine conflict has entered its fifth year, with impacts expanding from crude oil to diesel, aviation fuel, naphtha, sulfur, fertilizers, aluminum, helium, and food. HSBC believes this round of supply constraints is no longer concentrated in a single energy product but is gradually spreading to metals, chemicals, and agricultural products.

Inventory buffers in energy markets are particularly vulnerable. The U.S. continues to export and deplete its strategic reserves; if supply disruptions persist, oil inventories could fall to 'tank bottom' levels. European natural gas inventories are also significantly below targets, and a hot summer is accelerating energy consumption. If inventories cannot be effectively replenished before winter, the risk of price spikes will further increase.

On the demand side, AI infrastructure investment and energy transition are driving global electrification demand, pushing up prices for most base metals. Copper prices have risen to record highs, reflecting not only demand growth but also highlighting long-term supply constraints due to insufficient investment in new mines. Lithium prices have risen 130% over the past year, but increased production in Zimbabwe and Australia may limit further gains.

Agricultural products are simultaneously facing pressure from weather and costs. As the strong El Niño phenomenon intensifies, drought risks are rising in Australia and Indonesia, the Indian monsoon is weakening, and much of Southeast Asia is turning hot and dry. The Middle East and Russia-Ukraine wars are increasing supply risks for agricultural inputs such as fertilizers and diesel, driving up prices for wheat, cocoa, and coffee.

Although gold prices peaked in January 2026 and then retreated due to rising long-term interest rates, HSBC believes geopolitical risks, central bank gold-buying demand, and bond market uncertainty will continue to support precious metals.