New Delhi [India], October 21 : Geopolitical conflicts, disruptions to energy and agricultural supplies, 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 an October 20 report by Goldman Sachs.
The report noted 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 the bank 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/bbl and EUR70/MWh, respectively, by end-2026,” the report said.
However, the firm warned that a prolonged supply shortfall could significantly alter the outlook. “Brent might rally to $140 in early 2027 and average around $125/bbl in 2027” if average Gulf output remains 5 million barrels per day below February 2026 levels, it said.
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 per cent 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% 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.
Beyond near-term disruptions, Goldman Sachs expects copper prices to average USD 15,400 per tonne in 2027, supported by demand from electrification, data centres and artificial intelligence amid constrained mine supply. It also expects gold prices to reach USD 5,400 per ounce by the end of 2027, supported by central-bank purchases and diversification.
The Bloomberg Commodity Index has generated a total return of 36 per cent year-to-date, outperforming equities and bonds, the report added.