Commodity Price Forecast: Middle East escalation presents upside risks

What you will learn:

• Oil: Fears of a substantial escalation in the Middle East last week prompted the largest swing in the oil price in over a year. We view the price impact as transitory, although the conflict remains an upside risk. Overall, we have downgraded our Brent forecast for 2025 to US$72.60/bl as a review of our supply forecasts has resulted in our forecast market balance shifting from a deficit to a surplus in 2025. Weak demand persists in the US and China ensuring a bearish market next year.
• Copper: China’s central bank approved more monetary stimulus last month, boosting market exuberance. Consequently, we have raised our base metal price forecast slightly this month, but less than spot and futures prices. The monetary stimulus alone will not improve fundamentals, and more substantial fiscal stimulus is required. Therefore, we see prices pulling back from current highs.
• Gold: Gold prices will consolidate lower before year-end, but we think after that bullish fundamentals will prevail again. Solid demand from emerging market central banks and private investors – pushed by falling yields – are the main bullish demand forces.

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