Fears of a US recession sparked a global sell-off in equity markets on Monday (5/8) in a number of commodities, including oil, natural gas, metals and agricultural products, although the declines varied.
Commodity prices have been battered in recent weeks, hit by a sluggish economy in China as a major buyer, with crude oil prices falling about five percent last week, copper prices hitting a four-month low on the London Metal Exchange, and corn prices near their weakest levels since 2020.
“Commodities have been under selling pressure throughout the past month, which means there has been a momentum crash that is now hitting stocks,” said Saxo Bank analyst Ole Hansen.
Crude oil prices fell about 1-1.5 percent on Monday (8/5) in volatile trading. The decline was smaller than major equity indexes affected by concerns over a US recession. The potential for reduced oil demand was also dampened by price stabilization amid rising tensions in the Middle East.
Israel and the US are bracing for a more serious escalation in the Middle East after Iran and its allies Hamas and Hezbollah vowed to retaliate against Israel for the killing of a Hamas leader and a Hezbollah military commander last week.
“Geopolitical (factors), such as concerns about supply disruptions from the Middle East, and growing confidence that OPEC will not voluntarily ease its (production) cuts, are supporting oil relative to equities,” PVM analyst Tamas Varga told Reuters.
Copper prices plunged more than 3 percent to their lowest in four and a half months as the outlook for demand in China and the US, the world's two largest economies, triggered a sell-off in the metal used in the power and construction sectors.
The latest gold price fell 2.7 percent.
“Gold is relatively better than other metals when people are worried about a recession. But it will also come under pressure as people sell to maintain their margins in other markets,” Liberum analyst Tom Price said.
“The massive selloff in global equity markets and other financial markets today has also weighed on wheat, corn and soybean prices as risk aversion builds,” said Matt Ammermann, commodity risk manager at StoneX. (br/jm)
