Global Commodities: 2026 Outlook – Supply-driven crocodile cycle
At a Glance
The desk asserts that the divergence in commodity price movements signals a significant shift in market dynamics, with supply-constrained metals outperforming energy commodities. Per the full note from J.P. Morgan, this transition reflects a broader 'crocodile cycle' where supply factors increasingly dictate price trajectories. The outlook for 2026 suggests that metals will continue to thrive due to persistent supply constraints, contrasting with the oversupply in energy markets. This perspective aligns with our consensus, which anticipates a continued bullish trend for metals amid a bearish outlook for energy commodities.
Key Takeaways
- 01Supply constraints in the metals sector will continue to drive prices upward while energy markets face oversupply challenges.
- 02The traditional correlation between various commodity prices may remain broken, necessitating a reevaluation of investment strategies.
- 03As we approach 2026, the differentiation in commodity cycles will become more pronounced, favoring metals over energy.
Full Analysis
What the desk is arguing
J.P. Morgan projects that commodity prices will enter a new regime by 2026, characterized by supply-driven cycles that are increasingly decoupling from historical trends. This cycle is anticipated to favor metals, as they face supply constraints, while energy markets are burdened with surplus production.
Supporting this thesis, J.P. Morgan cites the distinct behaviors of various commodity markets, wherein energy prices experienced a reset downward in 2024, contrasting sharply with rising prices in the metals sector. This bifurcation underscores the complexities of global demand and supply dynamics, suggesting that investors should recalibrate their strategies accordingly.
The implicit counterfactual in J.P. Morgan's analysis is that the previously synchronized commodity cycles may not return, as persistent supply issues in metals and continued oversupply in energy reshape the landscape. This deviation in price behavior underscores the need for market participants to closely monitor supply chain developments in both sectors.
Market Implications
This analysis suggests investors should consider reallocating resources towards metals as a protective strategy against potential headwinds in energy markets. Given the expected continuation of the supply-driven dynamics, commodities exposure may need to be rebalanced to capitalize on these emerging trends.
From the original
Natasha Kaneva and team share J.P. Morgan’s 2026 Global Commodities Outlook. Commodity prices have experienced repeated and highly synchronized cycles across various markets over the past 50 years, with these fluctuations closely tied to global economic trends through shifts in d
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