Raw materials, including oil and copper, have joined global stocks in a sell-off on Monday as fears of an economic recession in the United States grow, raising concerns about demand even as some commodities receive support from fundamental market factors. Crude oil prices fell in volatile trading due to escalating tensions in the Middle East, while copper erased earlier gains following data that showed growth in China's services sector, with both commodities declining by about 2 percent.
Commodities had already taken a hit in recent weeks due to an economic slowdown in China, the largest consumer of these goods, with crude oil falling about five percent last week and copper on the London Metal Exchange reaching a four-month low, while corn neared its lowest level since 2020. Warren Patterson, the head of commodity research at ING, stated, "Oil has already suffered a lot, especially after Friday's sell-off. Clearly, this geopolitical risk looms over the energy market, and we are waiting to see what action Iran will take or if it will take any."
He added, "Metals might receive some relative support from policy as consumption increases." Tensions in the Middle East have helped limit losses in the oil market, with Israel and the United States bracing for a serious escalation in the region after Iran, Hamas, and Hezbollah vowed to retaliate against Israel following the killing of Hamas political bureau chief Ismail Haniyeh and a senior military leader of Hezbollah last week.
A private sector survey indicated that growth in China's services sector accelerated in July, supported by new orders, despite overseas demand momentum falling to its lowest level in 11 months. A monetary policy advisor to the People's Bank of China noted in comments reviewed on Friday that China should increase fiscal stimulus to revive economic growth and establish a stable inflation target to protect the country from falling into a "low inflation trap."
In agricultural markets, Japanese rubber futures rose on Monday to their highest level in over a week due to adverse weather conditions in Thailand, the world's largest producer of natural rubber, before the market surrendered its gains. Corn and soybean prices fell to their lowest levels in four years amid expectations of increased U.S. production, while wheat prices declined by 1.7 percent due to an abundance of global supplies.
