The second-half outlook for commodities comes down to two moving parts: whether the Middle East conflict resolves, and whether the AI investment boom holds.
Energy: where the strain shows first
Energy is where the strain shows first. The US and Iran agreed to reopen the Strait of Hormuz in mid-June, but transit is still running at just 12% of normal, 138 days into the disruption. Neighbours are planning for the long haul: DP World is building a new terminal on the Gulf of Oman to lean less on Jebel Ali, and Gulftainer is expanding at Khor Fakkan, both on “the right side of the strait”. Crude has lifted but sits below its earlier highs; the sharper pain is in refined products, with diesel and gasoline squeezed by missing Middle East refining capacity plus weak Russian and Chinese exports. Gas stays tight too, as Europe competes with Asia for US LNG and EU storage lags well behind the seasonal norm at 52%.
Inflation eases, China wobbles
The inflation read has improved for now. Eurozone inflation came in softer than expected at 2.8%, and US CPI slowed to 3.5%, helped by lower gasoline. That takes near-term pressure off both the ECB and the Fed, though a re-escalation in the Gulf could put rate hikes back on the table. China is the wobble: growth of about 4.7% in the first half has slowed enough to raise the prospect of stimulus, exports are booming on AI hardware and EVs, but a deep property slump and soft labour market sit underneath.
A higher floor for buyers
For commodity buyers, the takeaway is a higher floor. Vesper notes the intensifying El Niño is lifting the base under soft commodities in particular, even as oil-driven cost pressure has eased. The most likely path from here is a muddle: an inconclusive resolution in the Gulf, a more consistent reopening of Hormuz, and another leg up in AI enthusiasm that keeps valuations and raw-material demand elevated.
As one former US Treasury official said of China’s trade data, it’s “both fascinating and a bit insane”, a description that fits the wider macro backdrop just as well.
