SunSirs: Geopolitical Tensions Reshape Pricing Logic: Commodities Moving Toward a "New Equilibrium"

Amid the ongoing blockade of the Strait of Hormuz, and as of the time of reporting by the *China Securities Journal* on August 14, the benchmark NYMEX WTI crude oil futures contract had risen above $82 per barrel, while spot gold stood at $4,342.95 per ounce. Meanwhile, industrial metals such as copper, aluminum, and zinc have seen successive price rallies this year, driven by supply constraints at the mining level.

The impact of the geopolitical situation is deepening; as commodity markets move toward a new equilibrium, the trading logic for crude oil, gold, and industrial metals is shifting. Chen Li, Chief Economist and Director of the Research Institute at Chuancai Securities, noted that the geopolitical situation has evolved from a mere "disruptive variable" into a "core factor" in pricing, thereby reshaping commodity trading logic. The value of gold as a safe-haven asset and a reserve holding has become increasingly prominent. Crude oil is susceptible to rising risk premiums due to disruptions in producing regions and shipping lanes, while base metals like copper and aluminum have seen their strategic premiums rise due to added concerns over supply chain security. The explanatory power of traditional economic cycle and supply-demand frameworks has weakened, with prices exhibiting non-linear volatility driven by news flow. When observing the market, one must track traditional factors like supply, demand, and monetary policy, but place even greater emphasis on the impact of geopolitics on supply and trade flows. It is essential to rationally assess risk premiums, objectively understand the structural divergence among different commodities, and guard against market volatility risks stemming from extreme events.

Geopolitical Tensions Influence the Crude Oil Market

In its latest monthly report, the International Energy Agency (IEA) stated that the oil market faces a supply deficit of 1.8 million barrels per day, as "resurgent hostilities and maritime transport disruptions" hinder the recovery of production. This deficit could reach a five-year high over the course of 2026.

The IEA projects that global inventories—currently depleted—will be replenished as the oil market shifts back to a state of oversupply next year. The agency noted that member nations such as the United States, Japan, and Germany will need to refill their emergency oil reserves following the record releases announced in March. The IEA stated that while the market is expected to shift into a surplus later this year, significant risks remain; furthermore, the urgency of reopening the Strait of Hormuz has intensified as previously available inventory buffers are rapidly depleting.

Geopolitical tensions have become the central driver of crude oil pricing, with international prices fluctuating in response to expectations regarding navigation through the Strait of Hormuz. As of August 14, the primary NYMEX WTI crude oil futures contract had risen by over 1%, surpassing $82 per barrel. Sui Xiaoying, head of the energy research group and chief researcher at SDIC Futures Research Institute, noted that the situation between the U.S. and Iran remains volatile; the two sides are locked in a standoff over the Strait of Hormuz, and the energy supply chain continues to suffer disruptions. If substantive engagement occurs and progress is made on the Strait of Hormuz issue, the crude oil supply chain could recover, potentially driving prices down—possibly returning to the $70-per-barrel range. Conversely, if the deadlock persists, security threats to the strait continue, and supply chain damage remains, the price floor will stay supported, with international crude prices likely hovering around the $80-per-barrel mark.

"Amid the ongoing blockade of the Strait of Hormuz, OPEC data shows that in June, production from major oil-producing nations—including Saudi Arabia, Iraq, Kuwait, and Russia—fell below their respective quotas." Statistical data indicates that both supply and demand have contracted by approximately 5 million barrels per day, leaving the crude oil market in a state of tight balance. Consequently, even minor geopolitical fluctuations affecting the supply side dictate price trends; given current geopolitical developments, oil prices continue to face upside risk.

Regarding the outlook for the crude oil market, the current landscape is characterized by a tight balance between supply and demand. Barring any easing of geopolitical tensions, short-term crude oil prices are likely to fluctuate within the $80–$90 per barrel range. Long-term prices, however, will depend heavily on the evolution of the US-Iran situation; an escalation could push prices toward $100 per barrel, while a de-escalation could see them retreat to around $70 per barrel.

In the long run, as geopolitical impacts fade and the crude oil market rebalances, price trends will revert to the logic of macroeconomic cycles. Driven by expectations of macroeconomic growth, rising demand will become the primary driver, likely leading to a gradual upward shift in the central trading range of oil prices.

**Gold’s Value as an Asset Allocation Choice Becomes Apparent**

After a period of relative quiet, the gold market has recently sprung back to life, shaking off months of sluggish consolidation. As of August 14, the London spot gold price stood at $4,342.95 per ounce, marking a cumulative gain of over 7% since the start of the month and breaking out of the previous $4,000–$4,100 per ounce trading range.

The recent strengthening of gold prices is primarily driven by cooling expectations regarding Federal Reserve interest rate hikes and a shift in market risk appetite. US non-farm payroll data for July came in well below expectations, and the month-on-month CPI declined; consequently, the market has become uncertain about the timing and magnitude of further rate hikes this year. The resulting downward pressure on the US Dollar Index has created room for gold prices to rise. Although there has been no substantive progress in the US-Iran conflict, the market has largely absorbed the risk-aversion sentiment associated with these geopolitical tensions. Coupled with the recent positive performance of global stock markets, a recovery in risk appetite has also encouraged investors to allocate capital to gold. "Since August, gold prices have staged a continuous rebound. The primary drivers include easing expectations for a September rate hike by the Federal Reserve, a Middle East situation that—while volatile—has not deteriorated further, continued gold purchasing by central banks, and inflows into gold ETFs; these factors have collectively fueled a corrective rebound," said Zhang Jiefu, Deputy Dean of the Zhengxin Futures Research Institute. He noted that since the Federal Reserve moved away from relying heavily on forward guidance and 'dot plot' projections, market speculation regarding rate hikes has hinged primarily on employment and inflation data. Following weaker-than-expected non-farm payroll figures in July, the probability of a September rate hike dropped below 50%, driving a recovery in gold prices.

Regarding the impact of cooling rate-hike expectations on gold prices, Fan Rui believes that current prices have already partially priced in a year-end hike. However, market expectations regarding the timing of a hike remain subject to change, and the Federal Reserve's monetary policy independence warrants further observation. Consequently, the impact of Fed policy on gold is multifaceted and cannot be simply categorized as purely bullish or bearish.

"It provides short-term support, but we must wait for long-term drivers to emerge," Zhang Jiefu observed. He views the cooling of September rate-hike expectations as a corrective rebound for gold prices rather than the start of a new trend; there is currently no expectation for the onset of a rate-cutting cycle, and with continued volatility in the Middle East throughout August, long-term factors supporting an upward trend in gold prices have yet to be confirmed.

Looking ahead, Zhang Jiefu believes that from a long-term perspective—despite the Fed currently holding rates steady—expectations for future rate cuts remain, and central bank gold buying continues. However, further upside for gold prices depends on a decline in US Treasury yields. There is still room for gold prices to rise in the long run; 2025 is expected to see simultaneous enthusiasm for AI and gold, while 2026 may see the AI ​​boom persist alongside a slowdown in gold prices, with interest rates and geopolitical cycles causing frequent fluctuations. Should the long-term narrative for gold reassert itself, the price floor is likely to continue shifting upward.

Fan Rui added that, over the long term, driven by the need to hedge against deglobalization and the erosion of confidence in the US dollar, gold will continue to offer stable investment value for the foreseeable future. Qiu Zuxue, Executive Deputy General Manager and Chief Metals Analyst at Guolian Minsheng Securities Research Institute, stated that in the medium to long term, the primary driver of gold prices will revert to the logic of "central bank gold purchases combined with the weakening credibility of the US dollar"; he remains bullish on the upward trend of the long-term gold price baseline.

Liu Gang, Chief Overseas and Hong Kong Equity Strategist at CICC Research, believes that gold can serve as a "left-side" allocation asset to hedge against interest rate and policy uncertainties, noting that easing pressure from Federal Reserve rate hikes could provide room for such a move.

Copper, Aluminum, and Zinc Rally in Turn

Compared to gold, industrial metals—specifically copper, aluminum, and zinc—have outperformed gold so far this year. As of August 14, London Metal Exchange (LME) copper futures had risen over 13% year-to-date, surpassing $14,000 per tonne and approaching historical highs; LME aluminum futures rose over 8%, exceeding $3,200 per tonne; and LME zinc futures climbed more than 20%, topping $3,700 per tonne.

Regarding supply and demand, Zhang Jiefu noted that industrial metals have generally outperformed precious metals this year, driven primarily by supply constraints; price gains have varied depending on the severity of these constraints for each metal. Specifically, the shortage of copper raw materials has intensified, compounded by a "siphoning effect" on US copper markets driven by expectations of US tariffs; tight supplies of both raw materials and deliverable stocks have supported copper prices, keeping them strong at high levels. For aluminum, while overseas production capacity suffered significant losses due to earlier geopolitical tensions in the Middle East—and smelting margins remain healthy—the metal has been constrained by domestic capacity expansion limits and overseas energy issues, resulting in price fluctuations within a high range. Zinc has reached a turning point where its fundamentals are shifting from weak to strong; similar to copper, the shortage of ore is transmitting to the smelting sector—though this transmission process has been smoother than for copper—resulting in relatively larger price gains for zinc. "Copper and zinc share similar fundamental conditions—specifically, tight ore supplies and weakening processing fees—with the supply side providing stable price support for both metals. The supply landscape for aluminum differs slightly from that of copper and zinc, primarily due to fluctuations in electrolytic aluminum production capacity and inventory levels," noted Fan Rui. He added that geopolitical risks impact copper mainly through its financial attributes, whereas the effects on aluminum and zinc are felt primarily through localized logistics conditions and the release of accumulated inventories.

Alongside the upward trend in copper, aluminum, and zinc prices, relevant A-share listed companies have reported impressive financial results. Jiangxi Copper’s interim earnings forecast projects a net profit attributable to shareholders of between RMB 7.55 billion and RMB 8.50 billion for the first half of 2026, representing a year-on-year increase of 80.86% to 103.61%. Similarly, Yunnan Aluminum’s interim forecast anticipates a net profit attributable to shareholders of RMB 7.5 billion to RMB 7.8 billion, up 170.98% to 181.82% year-on-year. Both companies cited rising product prices as a key driver of this growth.

The non-ferrous metals team at China Merchants Securities noted that non-ferrous enterprises have continued to realize profits since the second quarter, with a high proportion of companies disclosing interim forecasts that exceeded market expectations. Firms dealing in gold, copper, and minor metals have generally delivered strong performance—driven by rising metal prices, increased production and sales volumes, and the commissioning of new projects—further confirming that industry fundamentals have not significantly weakened.

Regarding the future price outlook for copper, aluminum, and zinc, Zhang Jiefu observed that following a period of synchronized gains driven by both macroeconomic factors and fundamentals since July, prices for all three metals have reached high ranges. From a short-term fundamental perspective, concerns regarding potential short squeezes in overseas markets and steep futures-spot price curves are currently underpinning price levels. However, from a macroeconomic standpoint, there is currently insufficient momentum for these metals to break through previous highs; prices may instead fluctuate at elevated levels supported by fundamentals before potentially resuming their upward trajectory after September. In the stock market, related copper and aluminum stocks have moved upward in tandem, having already priced in the current rebound; looking ahead, prices for these three commodities are likely to remain high with the potential for further gains, making the performance of related stocks worth continued monitoring.

"Going forward, the price trends for copper, aluminum, and zinc will likely align over the long term while exhibiting increasingly divergent short-term rhythms: if the macro environment delivers positive signals, copper prices tend to outperform, whereas if the macro environment remains subdued, zinc prices tend to show greater strength," noted Fan Rui. Since stock prices primarily reflect corporate profitability rather than being determined solely by the prices of underlying commodities, the "stock-futures linkage" effect exists over the long term but is not a consistently positive correlation; investors must still consider a company's position within the industrial chain and its own financial performance.

Yan Rong, Chief Analyst for the Non-ferrous Metals Sector at Huaxi Securities, believes that from a medium- to long-term perspective, copper—as a critical metal for the energy transition—holds strategic allocation value under the policy guidance of the "15th Five-Year Plan." Driven by the massive infrastructure build-out for AI computing power, the demand narrative for copper is expanding beyond its traditional role as a metal for the power industry to become a core foundational material for AI hardware.

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