From a wealth manager’s perspective, what is observed in the behavior of the CRB Index following geopolitical tensions and disruption in the Strait of Hormuz is not simply an emotional market reaction to a temporary shock, but rather a profound sign of a shift in the “risk pricing regime” in the global economy; This means that markets no longer consider geopolitical risks as transient and reversible events, but have included them as structural and stable variables in their valuation models. This paradigm shift has caused price increases in commodity markets, especially in energy, metals, and agricultural products, to be not only rapid and severe, but also to have the property of "stickiness at high levels", so that even in the event of positive news or a relative reduction in tensions, prices return to pre-crisis levels with difficulty and with a significant delay.
In this context, it should be noted that the role of bottlenecks such as the Strait of Hormuz, through which a significant part of the world's energy flows pass, is not limited to physical supply, but rather these points act as "risk multipliers", since any disruption in them not only increases the cost of transportation and insurance, but also forces supply chains to be redesigned, activates alternative routes and increases the need for strategic storage, and all of these factors ultimately lead to a sustained increase in the cost of goods; which is why, in the current situation, the increase in the CRB index cannot be considered simply the result of demand growth or supply reduction, but rather it should be considered a reflection of the "repricing of uncertainty" at the global level, a phenomenon in which markets are willing to pay a higher premium for real assets to face a riskier future.
On the other hand, the change in the behavior of this index has also changed the correlation between different asset classes, so that, unlike in the past, when commodities often played the role of hedging against stock market fluctuations, now the increase in commodity prices has itself become a factor in putting pressure on monetary policy, because the sustained growth in energy and raw material prices keeps inflation at high levels and forces central banks to maintain contractionary policies for a longer period, and this in turn has a negative effect on the valuation of financial assets, including stocks and bonds; therefore, in the current situation, the commodity market is not only not an independent market, but has become one of the main drivers of the entire global financial system, such that any change in it can create a chain of reactions in other markets.
In such an environment, the baseline scenario for the future is neither a rapid return to full stability nor a descent into a full-blown crisis, but rather the continuation of a form of “controlled instability,” a situation in which tensions are not fully resolved but are not out of control either, and as a result, prices stabilize at levels above historical averages, while short-term fluctuations continue; Alongside this scenario, one must also consider the possibility of more extreme scenarios, in particular one in which the escalation of conflicts or the prolonged blockage of vital energy routes could lead to more severe jumps in commodity prices and even reproduce conditions similar to the oil shocks of the 1970s. Conversely, there is also a recessionary scenario in which the pressure from high energy prices leads to a decrease in global demand and ultimately a fall in the prices of some commodities, especially industrial metals, although this decline would not be a sign of recovery but rather a result of weakening economic activity.
