Geopolitical conflicts, supply disruptions and the growing threat of extreme weather could drive commodity price volatility into 2027, with crude oil,
European natural gas and agricultural markets facing significant upside risks, according to a report by Goldman Sachs. The study highlighted that intensified attacks on shipping in the Strait of Hormuz, damage to energy infrastructure and a colder-than-average European winter could push energy prices sharply higher, even as Goldman Sachs expects prices to moderate in its base-case scenario as Middle Eastern supplies recover. "Our base case is that a further recovery in Mideast supply and a moderation in the risk premium reduce prices of Brent crude and European natural gas to 90 dollars per barrel and EUR70/MWh by 2026-end," the report stated. However Goldman Sachs warned that a prolonged supply shortfall could significantly alter the outlook. "Brent might rally to 140 dollars per barrel in early 2027 and average around 125 dollars per barrel in 2027 if average Gulf output remains 5 million barrels per day below February 2026 levels," the report stated. European natural gas prices could also rise to EUR 150 per megawatt-hour by year-end if Persian Gulf liquefied natural gas exports remain depressed and winter temperatures are substantially colder than average. The report said energy-price movements had become more closely linked to equity and bond-market performance since the Iran war began. Over the past six months, the correlation between daily Brent price changes and the S&P 500 averaged nearly minus 0.5, while the correlation with changes in 10-year US Treasury yields averaged nearly 0.6. Agricultural commodities also face supply-side pressures from the Iran and Russia-Ukraine conflicts, potential food-export restrictions and the possibility of a severe El Niño. Goldman Sachs said the Bloomberg Commodity Index agriculture component had risen 19 percent year-on-year, while disruptions to fertiliser shipments through the Strait of Hormuz and grain exports through the Black Sea could further increase costs. "A strengthening El Niño has a greater than 81 percent probability of reaching super El Niño conditions," the report said, warning that the weather pattern could disrupt crop production through droughts and floods across key agricultural regions. (With Inputs From ANI)
