Commodity markets remained driven by escalating geopolitical tensions in the Middle East, although trading was more measured following the sharp rally seen earlier in the week. Continued U.S. military strikes against Iranian targets, renewed threats to shipping through the Strait of Hormuz, and ongoing attacks on Russian energy infrastructure kept a geopolitical risk premium embedded in crude oil prices. At the same time, precious metals extended their recent pullback as investors weighed ongoing geopolitical uncertainty against expectations for Federal Reserve policy, while industrial metals continued to find support from favorable long-term supply and demand fundamentals.
Within the oil and energy ETF universe, performance was mixed as investors paused following the sector’s recent surge. The Energy Select Sector SPDR (XLE) declined 0.8%, while the VanEck Oil Services ETF (OIH) fell 0.9% and exploration and production companies traded mixed. Refining stocks underperformed despite historically strong margins, with PBF Energy (-3.5%), CVR Energy (-3.1%), and Valero (-2.9%) leading the declines. Despite the short-term pullback, Wall Street remains constructive heading into second-quarter earnings, with analysts favoring refiners such as Marathon Petroleum and Phillips 66, along with oil-weighted producers including EOG Resources, Permian Resources, Matador Resources, and ConocoPhillips, citing continued free cash flow strength, improving capital returns, and resilient oil prices.
Natural gas markets remained relatively stable ahead of today’s EIA storage report. Henry Hub natural gas gained 0.7% Wednesday to $2.924/MMBtu before easing slightly in Thursday’s pre-market session to $2.915/MMBtu. Updated weather forecasts turned warmer for late July, helping stabilize demand expectations despite inventories remaining 6.6% above the five-year average. European natural gas prices continued to climb as disruptions to shipping through the Strait of Hormuz lifted LNG prices to their highest levels since March, while Europe entered the second half of summer with storage levels more than 22% below historical averages. Investors will closely monitor today’s EIA storage report, where consensus expects a 43 Bcf injection compared with the five-year average build of 45 Bcf.
Broader commodity markets continued to reflect strength in energy despite mixed performance elsewhere. The latest Department of Energy inventory report showed U.S. crude oil inventories declined by 1.69 million barrels, while gasoline inventories fell 1.53 million barrels, reinforcing healthy seasonal fuel demand. Distillate inventories, however, increased 4.56 million barrels, highlighting continued softness in diesel consumption. Refinery utilization climbed to 96.2%, one of the highest levels of the year, while crude exports rebounded sharply after falling to eight-month lows the previous week. Although WTI and Brent crude each gained just 0.3% during Wednesday’s session, both benchmarks remain more than 11% higher over the past three trading days as markets continue to price in elevated geopolitical risks and tightening global supply conditions.
The energy complex remained the primary source of strength across commodity markets. WTI crude oil closed at $79.60 per barrel, while Brent crude finished at $84.95, with both contracts holding near multi-month highs. Markets continue to respond to expanding U.S. military operations in Iran, additional attacks on commercial shipping throughout the Persian Gulf, and renewed Ukrainian strikes on Russian energy assets. Although Chinese refinery throughput fell to its lowest level since early 2020, reports suggest China has increased purchases of discounted Middle Eastern crude, partially offsetting weaker domestic refining activity. Investors will also continue monitoring tropical weather activity in the Gulf of America, which could become an additional supply risk as hurricane season progresses.
The precious metals sector weakened for a second consecutive session as investors reduced safe-haven exposure following recent gains and continued to evaluate the outlook for U.S. interest rates. Gold declined 0.2% to $4,060.70 per ounce, while silver fell 1.8% to $58.04 per ounce. Mining equities also softened, with the VanEck Gold Miners ETF (GDX) falling 1.2% and the VanEck Junior Gold Miners ETF (GDXJ) declining 1.8%. Despite the recent consolidation, analysts remain constructive over the intermediate term. UBS continues to maintain an overweight rating on industrial metals, forecasting a 520,000-metric-ton global copper deficit in 2026, while Citi expects platinum and palladium prices to recover as easing inflation reduces pressure on the Federal Reserve. Copper remained resilient, adding 0.1% to $6.386 per pound and extending its impressive 12.4% year-to-date gain, supported by long-term demand from electrification, artificial intelligence infrastructure, and renewable energy investment.
Commodity markets continue to be shaped by two powerful forces. On one hand, escalating geopolitical tensions remain supportive for crude oil and could keep energy prices elevated should supply disruptions intensify further. On the other hand, uncertainty surrounding Federal Reserve policy and a stronger U.S. dollar have created short-term headwinds for precious metals, even as long-term fundamentals remain constructive. As investors look ahead, today’s EIA natural gas storage report, U.S. retail sales, initial jobless claims, and Friday’s Baker Hughes rig count will provide additional insight into both commodity demand and broader economic conditions. While volatility is likely to remain elevated, the current environment continues to favor diversified commodity exposure, with energy benefiting from geopolitical uncertainty and industrial metals remaining well positioned to capitalize on long-term structural trends including electrification, artificial intelligence infrastructure, and global resource security.
