How Oil and Copper Prices Shape Your Investment Portfolio
Commodities like oil and copper have always been shaped by supply and demand over the long run. While current events such as wars and tariffs can move prices in the short term, these basic market forces always win out in the end. Understanding this can help investors stay calm when commodity prices swing sharply.
Commodities have been one of the best-performing investment categories this year, and they have also helped support other parts of the market, including U.S. stocks. Oil prices have moved up and down from month to month, copper has hit new record highs, and precious metals surged early in the year before pulling back.
These short-term swings are normal for commodity markets. The more useful question for investors is what supply and demand conditions tell us about the broader economy and how commodities fit into a well-built portfolio.
Date Range: January 1, 2010 to Latest
Oil markets have been very active this year, which shows just how hard it is to predict commodity prices. Oil jumped to multi-year highs in March when the war in Iran began. Since then, Brent crude (a global benchmark for oil prices) has ranged from as low as $72 per barrel in early July back toward $100 as of today, reaching a seven-week high.
The main cause of these swings is the ongoing conflict in the Middle East. Most recently, Houthi militants in Yemen struck Saudi Arabian energy infrastructure, raising fears about oil supply disruptions and pushing Brent crude back toward $100 per barrel. Key shipping routes in the region, including the Strait of Hormuz and the Bab al-Mandab Strait, remain vulnerable, making oil transport fragile.
For everyday consumers, higher oil prices mean higher prices at the gas station. The national average for regular gasoline has been around $4.15 per gallon, and over $5.00 for premium, according to AAA.1 Energy costs make up more than 7% of the Consumer Price Index (a measure of inflation), so high oil prices have kept overall inflation elevated all year.2 It is worth noting that this kind of oil price volatility is not new. During the Russia-Ukraine conflict in 2022, Brent crude topped $120 per barrel before falling sharply. Today, with the U.S. producing more than 13.8 million barrels of oil per day, the country is somewhat better protected from these shocks than in the past.3
Copper prices reflect both trade policy and growing long-term demand
Copper has also hit record highs this year. Investors sometimes call it "Dr. Copper" because its wide use across industries, from construction and energy to electronics and transportation, makes it a useful signal for economic health. Two main factors have pushed copper prices higher: concerns about tariffs on imported copper and strong long-term demand.
On the tariff side, the U.S. government is exploring new import tariffs on refined copper under Section 232 of the Trade Expansion Act of 1962, which allows tariffs on goods considered important for national security.4 The goal is to encourage more domestic copper production. Combined with tight supplies and slower production growth, this has pushed prices higher. At the same time, demand for copper has increased because of AI data centers, which use thousands of tons of copper for electrical wiring and cooling systems.5 As technology companies continue to build larger data centers, demand for copper keeps growing.
Commodities are best illustrated in a portfolio context
For long-term investors, what matters most is how commodities fit into a broader, diversified portfolio (one that spreads investments across many different asset types). The Bloomberg Commodity Index is the top-performing asset class so far this year, driven by high oil prices and strong demand for metals and other materials. But as the chart above shows, commodities can be very volatile, outperforming in some years and lagging in others.
The good news is that many other parts of the market have also done well this year, including emerging market stocks, small-cap stocks, and U.S. stocks. Higher commodity prices have helped areas like the energy sector, which has been the best-performing sector in the S&P 500 this year. A well-built portfolio is designed to benefit from all of these trends while managing risk and keeping the focus on long-term financial goals.
The bottom line? Commodity prices are sensitive to geopolitics, trade policy, and economic cycles. A balanced portfolio that includes exposure to different asset classes remains the best way to navigate these swings to achieve financial success.
About the author:
Chief Investment Officer
Andrew is the Chief Investment Officer for Covenant Wealth Advisors and a CERTIFIED FINANCIAL PLANNER™ practitioner. He has over 11 years of experience in the financial services industry in the areas of wealth management and financial planning for retirement.
Disclosures: Covenant Wealth Advisors is a registered investment advisor with offices in Richmond, Reston, and Williamsburg, VA. Registration of an investment advisor does not imply a certain level of skill or training. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. This article was written and edited by a CERTIFIED FINANCIAL PLANNER™ professional with the assistance of AI. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.
Index Descriptions
S&P 500
The Standard & Poor's 500 Index is a capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregate market value of 500 stocks representing all major industries.
Bloomberg Commodity Index
The Bloomberg Commodity Index is a broadly diversified financial benchmark that tracks the price performance of futures contracts on physical commodities across multiple sectors.
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