The New Age of limited resources
The current Iran conflict has reemphasised the importance of securing the supply of critical minerals and energy. Restrictions of maritime traffic through the Strait of Hormuz, a critical waterway for global trade, have resulted in shortages and higher prices for many raw materials, including energy, fertilisers, sulphur, helium and strategic industrial metals. Even if Strait of Hormuz traffic resumes in the short term, supply shortfalls will persist for several months as production slowly returns to pre-conflict levels.
Despite the strong performance of the broader commodity complex since 2022, in our view, most investors remain underexposed to this geopolitically-sensitive asset class. Moreover, the conflict has highlighted the need for energy-importing regions, such as Europe and Asia, to invest heavily to become more self-sufficient in energy and to secure greater sources of oil and natural gas from outside the Gulf.
Our recommendations
A theme focused on:
- Precious metals
- Strategic metals
- Energies critical in technology
- Renewable energy production and storage
- Companies extracting and refining the above commodities
- Companies active in water purification and infrastructure
- Structured solutions based on precious/industrial metals or mining companies
Key risks
- A slowdown in demand for commodities in the event of an economic recession.
- Reduced investor appetite for safe-haven assets (precious metals) if geopolitical tensions ease.
- Commodity prices are subject to volatility, as there is an element of speculation involved.
- Some supply disruptions that have boosted metal prices could prove temporary if shuttered or paused mining capacity is brought back online.
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