Commodities August outlook: A bull market in supply stress
A look at how geopolitical disruptions are reshaping global commodity flows, raising the cost of delivery, and narrowing the margin for error across critical supply chains.
Duration: 9 Mins
Date: Aug 21, 2026
In fact, it is one of the defining characteristics of the asset class.
A barrel of oil, bushel of wheat, or cargo of liquified natural gas (LNG) must be produced somewhere, transported somewhere and ultimately delivered somewhere. Unlike financial assets, commodities are constrained by geography, infrastructure, weather and, increasingly, geopolitics.
Those constraints are also part of what can make commodities behave differently from stocks and bonds. When supply chains are disrupted, the price of the physical commodity often becomes the mechanism that balances supply and demand.
Global corridors under pressure
What is unusual today isn't the existence of supply stress. It is how many of the world's major commodity arteries are under stress at the same time. With that, we may be experiencing something of a bull market in supply chain stress.
Strait of Hormuz
The world's most important energy chokepoint
Before the current conflict, roughly one-fifth of global oil and LNG shipments passed through this narrow waterway.1 Today, normal shipping patterns have been dramatically disrupted. Only five commodity vessels reportedly transited Hormuz on Saturday, August 15, and none on the following day.1 That compares with 31 during the previous weekend and more than 130 vessel transits per day before the war.1
The consequences extend well beyond crude oil. Hormuz is also important to the flow of refined products, LNG and commodities and feedstocks tied to aluminum and fertilizer production.
Energy producers and consumers have begun adapting. Saudi crude is increasingly being offered through delivery points outside Hormuz, while alternative pipelines and ports are being used where possible. But this illustrates an important feature of commodity markets: alternative supply routes are rarely free.
They may require longer journeys, different infrastructure, additional ships, higher insurance premiums, or higher transportation costs. The effect can be seen in the refined products that the oil is used to produce. US diesel profit margins have topped $100 per barrel of oil.2
The commodity may still exist. Its ability to reach the consumer at the same price and at the same time, however, does not. Saudi Aramco is considering a new pricing mechanism which takes into account the cost of additional legs of the supply journey.
Bab el-Mandeb
Solving one bottleneck can lead to another
Escaping Hormuz doesn't necessarily mean escaping geopolitical risk.
Houthi attacks and threats against commercial shipping have made the Bab el-Mandeb route increasingly difficult to navigate. Recent incidents, including ballistic missile strikes on commercial vessels, contributing to a sharp decline in traffic through the strait. Buyers in Asia have also reported limited tankers availability as some vessel operators remain reluctant to transit the area while security risks persist.
The importance of Bab el-Mandeb extends far beyond energy. Oil, refined products, LNG, grain, fertilizers, metals, coal, iron ore, and containerized goods traveling between Asia and Europe can all depend on the Red Sea-Suez route. Ships can avoid the Red Sea by traveling around Africa's Cape of Good Hope to enter the Mediterranean. But again, the supply hasn't escaped the disruption. The voyage has simply become longer.
Longer voyages consume more fuel, extend transit times, reduce effective shipping capacity, and raise freight and insurance costs. Saudi Aramco cargoes moving through Yanbu on the Red Sea are priced using Aramco’s monthly official selling price for Asia, plus a pipeline fee to account for transit through the East-West pipeline from the Persian Gulf to the Red Sea. Thus, creating an interesting commodity market dynamic: you don't necessarily have to destroy supply to make it more expensive. Sometimes you only have to make it harder to deliver.
Black Sea
When producing a commodity isn't enough
That distinction is becoming increasingly important in the Black Sea.
Russia and Ukraine are major producers and exporters of wheat, corn, barley, sunflower products, oil, refined products, steel, iron ore, fertilizers, and coal. Since Russia's invasion of Ukraine in 2022, the region has repeatedly demonstrated that producing a commodity and being able to export it are two very different things.
The problem has only intensified again this summer. Around 90% of Ukraine's wheat, corn and sunflower exports normally leave through Black Sea ports.3 Intensifying Russian attacks and restrictions on shipping contributed to Ukrainian grain exports falling approximately 75% year over year during the first two weeks of August.3
The timing is particularly problematic because the disruption coincides with harvest. Grain sitting in a silo is technically global supply. But to an importer unable to receive it, it might as well not exist. And the delivery problem now runs in both directions across the Black Sea.
Novorossiysk has approximately 700,000 barrels per day of oil-export capacity and handles not only Russian Urals and Siberian Light crude but also Kazakh KEBCO.4 Operations subsequently resumed, but the episode illustrates the growing reach of the conflict into commodity infrastructure.
The Black Sea is therefore simultaneously experiencing risks to agricultural exports from Ukraine and energy exports from Russia and Central Asia. The droughts in Europe have already been severe enough for the French Agriculture minister to state the crop losses as “extremely significant”.5 That is an unusually important combination for global commodity markets.
Caspian Sea
The battlefield expands into infrastructure
The Caspian Sea isn't a global shipping lane like Hormuz or the Suez Canal. Its importance comes from something different. It is a major production basin and transportation hub connecting oil, natural gas, uranium, grain, metals, and sulfur production with pipelines, railways, and inland shipping routes stretching across Russia, the Caucasus, and Central Asia.
Ukraine's increasingly sophisticated long-range drone campaign has demonstrated that infrastructure once considered safely removed from the battlefield may no longer be safe. That expands the geographic footprint of commodity risk. Ports, pipelines, storage tanks, refineries and pumping stations hundreds of miles from the traditional battlefield can suddenly become part of the conflict.
The lesson from the Black Sea and Caspian is increasingly similar: modern warfare can reach much farther into the commodity supply chain than the traditional battlefield.
Eastern Mediterranean
Risk follows the cargo
Recent drone attacks involving energy vessels off Egypt have added another layer of risk to a supply chain already dealing with disruption at Hormuz and Bab el-Mandeb. Even when physical supply isn't lost, attacks can increase insurance premiums, discourage vessel owners from entering particular waters, and reduce the pool of ships available to move cargo.
Again, commodity markets don't necessarily need to lose physical supply for prices to respond. Saudi Aramco is considering a new pricing framework for its crude that loads from Egypt’s Sidi Kerir port for shipment to Asia to reflect higher shipping costs through the Suez Mediterranean pipeline.6 Sometimes it is enough to make that supply more difficult, expensive, or dangerous to deliver.
Panama Canal
Geopolitical risk without physical disruption
The Panama Canal provides a somewhat different example. Trade through the canal itself continues normally. But the political dispute surrounding Hong Kong-based CK Hutchison's operation of ports at opposite ends of the canal demonstrates how commercial infrastructure has become part of the strategic competition between the US and China.7
The canal remains one of the world's most important trade arteries, particularly for trade between the Atlantic and Pacific oceans. A serious disruption would potentially affect containerized goods, LNG, grain, coal, refined products, chemicals, vehicles and machinery while also carrying strategic implications for the US Navy.
The lesson is important. Commodity investors increasingly have to consider not only where something is produced, but also who controls the infrastructure required to move it.
Arctic
From remote frontier to strategic bypass
All of this helps explain why the Arctic is transitioning from a remote frontier into a region of increasing geopolitical significance.
A voyage between Northeast Asia and Northern Europe can be approximately 40% shorter through the Northern Sea Route under favorable conditions than through traditional southern shipping routes.8
More importantly, the route can potentially avoid the South China Sea, Strait of Malacca, Indian Ocean, Bab el-Mandeb, and Suez Canal. China is already demonstrating greater interest in using the Northern Sea Route for commercial shipping.
That matters because in a world where traditional chokepoints are becoming less reliable, the strategic value of alternative routes rises. The Arctic therefore isn't merely about accessing untapped natural resources. It is increasingly about controlling the routes through which resources move.
Europe
Entering winter with less margin for error
Transportation isn't the only vulnerability. European natural gas inventories remain unusually low heading toward the heavy-demand season. That doesn't guarantee a natural gas shortage.
Weather will ultimately play an enormous role in determining winter demand, while LNG imports and pipeline flows will determine Europe's ability to replenish inventories. But lower storage reduces the margin for error.
Europe therefore enters the coming winter more exposed to some combination of a colder-than-normal winter, LNG disruption or another geopolitical shock. And those LNG cargoes must travel through some of the same increasingly contested waterways discussed above.
That connects what might otherwise appear to be separate risks:
Commodity supply chains were designed to be interconnected for redundancy but now are being separated along geopolitical lines.
Surely everyone must already be bullish?
Given all of this, it would be reasonable to assume investors are already positioned for shortages.
Surely oil prices must be at record highs. Surely investors must be heavily long energy. Interestingly, the opposite has occurred.
Market participants appear increasingly weary of repeated on-again, off-again peace negotiations in both the Middle East and Ukraine. Each headline suggesting a cease-fire or diplomatic breakthrough encourages markets to discount geopolitical risk. Eventually, many investors appear to have simply left the trade.
Using futures contracts as a measure of investor positioning – netting short positions against long positions – investors have recently been among the least bullish on WTI crude since the US shale revolution transformed global oil markets more than a decade ago.
There have been only a handful of comparable periods, including the third quarter of 2025 and June 2026. What happened after those periods is worth remembering:
- Following extreme pessimism in October 2025, WTI subsequently rose approximately 85% through April 2026, with the US-Iran conflict ultimately becoming an important catalyst.9
- Following another extreme positioning in early July 2026, WTI rose approximately 34% in just over two weeks.10
That doesn't mean history must repeat itself. But it demonstrates something important about commodity markets: The greatest upside risk doesn't necessarily occur when everybody is worried about supply. It can occur when the supply risks remain, but investors have stopped worrying about them.
Natural gas tells a similar story
US natural gas positioning presents another interesting example.
Speculators currently hold an unusually large number of short contracts for this time of year. There are perfectly reasonable explanations:
- US production remains strong, inventories provide comfort and near-term weather can reduce demand expectations. But August is also unusually early to have tremendous confidence about winter.
- Weather is one of the largest variables affecting US natural gas demand, and the severity of winter heating demand won't be known for months. The comparison with 2021 is instructive.
- Natural gas positioning became extremely bearish before the full consequences of tightening global energy supplies, Russia's invasion of Ukraine and ultimately the damage to the Nord Stream pipelines became apparent.
From September 2021 through August 2022, US natural gas prices subsequently rose approximately 101%.11 Again, that isn't a forecast that prices will repeat the move. It illustrates the asymmetry that can develop when investor positioning assumes normality while the physical system becomes increasingly vulnerable to abnormal events.
The disappearing margin for error
This may be the more important theme for commodity investors.
No single disruption discussed here necessarily creates a commodity bull market. Hormuz could normalize. A Black Sea agreement could improve Ukrainian exports. Houthi attacks could subside. Europe could experience another mild winter. But commodity supply chains don't operate independently. They form a network. Close one route and cargo moves onto another. Lengthen voyages and ships become unavailable elsewhere. Raise insurance costs and delivered commodity prices increase. Reroute LNG and regional natural gas markets tighten. Remove grain from one exporter and importers compete for supply from another. Attack a refinery and crude oil may suddenly need to find a different buyer while consumers search for replacement refined products.
The cumulative effect is a reduction in redundancy across the global commodity system.
That distinction matters. Commodity markets don't require the world to physically run out of something to produce significant price moves. They require only a temporary mismatch between the amount of supply available where it is needed and the amount consumers demand. And the less redundancy the system has, the smaller the disruption required to create that mismatch. That is what makes today's combination particularly interesting.
Final thoughts
We have unusually high geopolitical stress across several of the world's most important commodity corridors. In order to meet current demand, inventories have been drawn down, backup supply routes are being used, and flexibility has been truncated. We have reduced cushions in markets such as European natural gas. Yet investor positioning in several major commodity markets continues to reflect considerable pessimism. Physical-market vulnerability appears to be rising at precisely the moment financial-market conviction in that vulnerability is falling. That doesn't guarantee higher commodity prices. But it creates something commodity investors should pay attention to: asymmetry. The world is discovering that having enough of something and being able to deliver it are not the same thing. And in commodity markets, the difference between those two things is often where volatility and opportunity begins.
