Commodities Update July 2026
Most commodities fell in June following the signing of the US and Iran memorandum of understanding on 17 June. Our broadest commodities index fell –3.2%mth over the month. Oil led the falls, with Brent down –16.3%mth, while Japanese LNG was down –2.5%mth. Iron ore too fell sharply, down –7.2%mth as transient sources of price support faded, while gold slid –7.4%mth and aluminium –5.1%mth. Copper was broadly unchanged. Coal was the exception with both coking (2.6%mth), and thermal coal (10.4%mth) higher.
The following is based on text from the July Market Outlook (PDF 3MB)
For more details of our longer-term forecasts see July Commodity Forecasts
Most commodities fell in June following the signing of the US and Iran memorandum of understanding on 17 June, which established a 60‑day ceasefire and critically, the reopening of the Strait of Hormuz. Our broadest commodities index fell -3.2%mth over the month. Oil led the falls, with Brent down -16.3%mth, while Japanese LNG was down -2.5%mth. Iron ore too fell sharply, down -7.2%mth as transient sources of price support faded, while gold slid -7.4%mth and aluminium -5.1%mth. Copper was broadly unchanged (0.1%mth). Coal was the exception, with coking coal up 2.6%mth, and thermal coal 10.4%mth higher. Reflecting recent developments we have revised our crude oil forecast lower, with a September quarter average Brent price of US$83/bbl, US$4 below our previous update.
Note all prices in the following text are quarter averages.
Oil prices slide but volatility likely ahead
Brent prices have fallen over the past month to just above US$70/bbl in early July, fully unwinding the war premium and back to levels last seen in late February. The initial slide was in line with our view as vessels trapped inside the Strait have exited and empty tankers waiting outside have moved in. That said, supply has come back a touch faster than we expected. UAE crude exports are already at pre-conflict levels and Saudi exports have normalised rapidly, helped by the absence of well shut-ins, ample storage and continued pipeline flows through the conflict.
However, as we have previously highlighted, the MoU would always be an uneasy truce, with key positions between the US and Iran unresolved and volatility ahead. This was evident with flare-ups over the last week pushing prices back up to around US$80/bbl. While hostilities should be short-lived and optimism will re-emerge between flare-ups, we expect demand and supply fundamentals to reassert as the primary driver of prices over the coming months.
Notably, inventories remain very low. OECD government stocks fell 163mb in May (-1.8mb/d) to their lowest since December 1990, and a rebuild in government reserves will support demand. Adding to this is China. Lower Chinese imports have been a key buffer against the global supply shock and is one that will fade as demand returns. In June, China accounted for just 13% of seaborne crude imports, down from 20% a year earlier, and independent refinery operating rates have fallen to a nine-year low of 46%. We look for some return in demand ahead, particularly in Q4 as refiners restock ahead of Chinese New Year. Meanwhile, although supply will continue to recover, inbound vessel traffic through the Strait remains well below pre-conflict levels, with mine-clearance and recent Iranian strikes on transiting vessels holding back the recovery. Overall, we expect Brent to average US$83/bbl in Q3, $4 below our June forecast, and US$85/bbl in Q4. Volatility will remain a feature, with much depending on the ceasefire holding and the pace of normalisation in shipping through the Strait, as captured in the two scenarios we published in June.
LNG markets remain tight
LNG markets, unlike oil, remain relatively tight. Damage to the world's largest LNG export complex at Ras Laffan in Qatar, limited LNG vessel availability and constrained spare liquefaction capacity continues to weigh on supply. As a result, Japanese LNG prices have not fallen as much since the signing of the MOU. At around US$16-17/mmbtu in early July, prices remain around 50% above pre‑conflict levels.
While we have revised lower our expected peak in Japanese LNG prices to US$18.6 /mmbtu in the September quarter, we expect the recovery in supply to the region to remain constrained, with prices unlikely to return to pre‑conflict levels until 2028. Domestically, however, the Australian gas market remains relatively insulated, supported by the FY2027 Federal Budget's domestic gas reservation scheme, which requires exporters to supply the equivalent of 20% of gas exports to the Australian market.
Coal remains supported in the near term
Thermal coal prices have softened in early July from recent highs, in line with the broader energy commodity sell‑off following the US–Iran MoU. Other sources of transient support have also begun to fade. Weather disruptions in Newcastle throughout June have eased, supporting a normalisation in cargo loading volumes, while temperatures across China were closer to seasonal norms despite earlier concerns around a potential El Niño event. Despite this, prices remain elevated relative to pre‑conflict levels. LNG markets continue to support the relative cost competitiveness of thermal coal, with shifting energy security priorities across Japan, South Korea and Taiwan driving increased coal procurement as a hedge against LNG supply disruption. While this demand impulse is unlikely to offset softer Chinese imports due to milder weather and weaker Indian imports amid ample domestic supply and a weak rupee, broader Northern Hemisphere summer cooling demand should continue to provide support. We expect Newcastle thermal coal prices to average US$136/t in the September quarter before easing towards US$120/t through 2027 as demand normalises. Over the longer term, prices are expected to rise as ongoing demand outpaces supply growth, with mine depletion, regulatory hurdles, community opposition and financing constraints limiting new capacity, particularly in Australia.
Coking coal prices have also softened from recent highs alongside the broader commodity sell‑off, although the market has remained relatively more resilient given ongoing supply tightness. A major gas explosion at a coking coal mine in Shanxi province in late May resulted in 82 fatalities, prompting widespread inspections and production suspensions across coal mining operations in China. While the bulk of the price response occurred during June, a full normalisation of suspended capacity is not expected until at least August. This tightness is unlikely to be fully offset by softer demand from Indian steelmakers, where inventories remain elevated, margins are compressed, and the construction sector has been further disrupted by the monsoon season. As a result, we expect premium low vol coking coal prices to peak at an average of US$241/t in the September quarter of 2026 before moderating.
Iron ore breaks below US$100/t
Iron ore prices fell below US$100/t at end‑June amid the broader commodities sell‑off following the signing of the US‑Iran memorandum of understanding. While prices have since oscillated either side of the psychological threshold, downward pressure is building as several sources of temporary support begin to fade. Higher freight costs linked to the energy shock have started to unwind, reducing price support, with freight accounting for an estimated 15–30% of delivered costs. Global ore supply is also ample, supported by improved weather conditions in Australia and Brazil that has lifted shipments. The Shanxi mining disaster has driven coking coal prices higher, further compressing steelmaker margins that are already lower on tough competition between mills, and weighing particularly on demand for lower‑grade ores. These weaker conditions are reflected in China's steel sector PMI, which has remained in contractionary territory since April, while iron ore inventories at Chinese ports remain historically elevated. While recent CMRG restrictions on some Fortescue inventories held at ports may provide modest support, the impact is likely to be limited given abundant existing stockpiles. We continue to expect the 62% Fe index to average US$97/t in the December quarter.
The medium‑term outlook is becoming increasingly challenging, with surplus conditions expected to emerge. Supply‑side pressures are building as new low‑cost output from Simandou enters the market, with Wood Mackenzie estimating export volumes could double to 40Mt in 2027. Persistently high inventories in China and softer global steel demand, as major economies contend with the effects of recently elevated energy costs, are expected to add further downside pressure. Increased scrap use and the ongoing structural decline in Chinese steel production are also eroding underlying demand, with growth in India and South‑East Asia on the back of increased urbanisation and population growth providing only a partial offset. We therefore expect iron ore prices to soften further, averaging around US$84/t in the December quarter of 2027, as surplus conditions become more evident.
Gold struggles against higher yields
Gold has corrected sharply from its January highs, erasing most of its gains through 2026. This is reflective of the ongoing Middle East conflict, with markets increasingly focused on the inflationary implications of sustained higher oil prices and the likelihood that central banks may need to accelerate rate hiking cycles. While gold saw a brief bounce following the signing of the MoU, President Trump's subsequent announcement that the agreement was effectively over saw prices retreat once again to below US$4,100/oz. As a non‑yielding asset, gold has faced a notable rotation as higher real yields have become increasingly attractive, with safe‑haven demand proving insufficient to offset this dynamic. Additional pressure from profit‑taking, capital rotation into high‑profile IPOs, together with some central bank selling, has also weighed on prices.
As a result, we have modestly downgraded our outlook, with the September quarter average now expected at US$4,560/oz. Some support is likely to emerge should progress towards a more durable resolution of the conflict materialise. A period of lower volatility and easing real yields would provide scope for prices to stabilise and encourage a gradual return of longer‑term investors. Further support may also arise around the US midterm elections, where safe‑haven demand could strengthen. We therefore expect modest gains through the remainder of 2026, followed by a period of consolidation in early 2027 as brownfield expansions at existing operations lift supply in response to recent high prices. Over the longer term, structural support is expected to persist, underpinned by ongoing Asian demand and central bank buying, with 45% of central banks expecting to increase gold holdings, according to the World Gold Council's 2026 Central Bank Gold Reserve Survey, up from 43% a year earlier.
Copper faces growing headwinds
The sharp rally in copper prices over the past year stalled in June, with prices rising just 0.1%mth over the month. A key source of temporary support has begun to fade, with sulphuric acid prices – critical to copper production and closely linked to Gulf supply – falling following the signing of the US–Iran MoU. While investor demand tied to growth expectations and ongoing US stockpiling ahead of anticipated changes to Section 232 tariffs are likely to continue supporting prices in the near term, headwinds are beginning to build. US stockpiling suggests the market remains well supplied in the near-term, while elevated energy costs risk weighing on global industrial activity and undermining demand. Chinese demand also remains subdued, with weakness in the construction sector continuing to weigh on activity, although transport sector electrification and renewable energy investment are providing some offset. Against this backdrop, we expect copper to average US$13,290/t in the September quarter.
Over the medium term, incremental mine supply is expected to place downward pressure on the market. However, longer‑term electrification trends and manufacturing localisation should provide a floor under prices, with a trough of around US$12,000/t expected by end‑2028. Beyond this point, prices are expected to strengthen as net‑zero targets approach, renewable deployment accelerates and expanding data‑centre investment drives additional demand for energy generation and transmission infrastructure.
Aluminium market tighter than prices imply
Aluminium prices have retraced sharply from their conflict highs, falling to below US$3,100/t by early July. Markets appear to have largely priced in a rapid return of Gulf supply with the region accounting for around 9% of global smelting capacity, with a considerably larger share of global trade. The price decline has occurred despite the IAI reporting that GCC aluminium production remained 38% below pre‑conflict levels in April, while the Mozal refinery in Mozambique remains under care and maintenance.
Given the time‑ and capital‑intensive nature of restarting Gulf smelting capacity, combined with the ongoing loss of African supply from Mozal, current prices appear inconsistent with underlying market tightness. Further price support is likely to come from China, which accounts for 60% of global production but has only marginally increased output, while Guinean bauxite export controls present an additional source of risk. Although a full return of the conflict premium appears unlikely, we expect aluminium prices to strengthen through the remainder of the September quarter, averaging US$3,360/t, around 10% below our previous update. Tight market conditions are expected to persist into the March quarter of 2027, with prices forecast to peak at an average of US$3,450/t before easing as supply stabilises and new Indonesian capacity comes online. Longer term support is expected to come from EV, grid infrastructure and data‑centre investment, while growing competition with datacentres for power may constrain future smelting capacity expansion.
Lithium prices slip, but structural support remains.
The lithium market has transitioned towards a more balanced position, with spodumene (6% FOB Australia) prices having stabilised in the US$2,000–3,000/t range. Prices softened by 10% in June to US$2,344/t as markets responded to the prospect of normalising oil flows and potentially softer EV demand. Despite this, the outlook remains constructive. Near-term support is expected to persist as downstream users maintain lean inventory positions amid ongoing price volatility, while recent fuel insecurity continues to encourage investment in energy storage solutions. Additional support is likely to come from accelerating global EV adoption as consumers respond to higher fuel prices, with electric vehicles projected by the IEA to account for 28% of global sales in 2026. Unlike earlier in the cycle, the EV market is now sufficiently mature for fuel price dynamics to influence purchasing decisions, with lower-cost Chinese EVs gaining share and accounting for 60% of global EV sales in 2025.
Over the medium to longer term, lithium demand is expected to remain underpinned by structural electrification trends. EVs will continue to be the primary source of demand, with sodium-ion battery chemistries unlikely to meaningfully challenge lithium's dominance given their lower energy density and higher weight. Growth in battery energy storage systems is also expected to accelerate alongside expanding renewable generation, while the increasing prevalence of data centres is likely to support demand for storage solutions as operators seek to alleviate transmission constraints and enable peak shaving. On the supply side, expanding production, particularly from Australia, is expected to place a cap on price upside.
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