By Pierre Daillie, AdvisorAnalyst
The Iran war changed the conversation. In one geopolitical shock, commodities went from a neglected allocation footnote to an urgent strategic question. But the more important insight from AllianceBernstein's Inigo Fraser Jenkins and Robertas Stancikas isn't about oil. It's about what was already underway before the missiles flew.
Their May 2026 paper makes a sweeping structural case1: the physical economy is returning, and most portfolios are catastrophically underweight it.
The Structural Setup: Why Now
The proximate trigger is obvious — an energy shock from the Iran conflict has repriced risk across commodity markets. But Jenkins and Stancikas are careful to separate the tactical from the strategic. The real argument is cumulative: deglobalization, AI-driven capex, resource nationalism, dollar debasement risk, and a global middle class expansion are all converging on the same asset class simultaneously.
"The change in geopolitical order makes this kind of supply disruption more likely, not necessarily just for oil," they write. The old playbook — globally integrated supply chains engineered to minimize cost — is unraveling. "The consequence of the need to rebuild them is not only directionally inflationary but also implies greater volatility of inflation."
This is a portfolio architecture problem, not just a macroeconomic one. Investors have spent fifteen years underweighting real assets while financial assets dominated. Jenkins and Stancikas challenge whether that dominance holds under a higher-inflation, higher-volatility regime. Their data is sobering: real commodity returns since 2010 have fallen sharply below historical averages across every sub-category except precious metals. But historically, when inflation breaches 4%, commodities outperform equities — often significantly.
The AI Connection: Tangible Beneath the Digital
One of the paper's most provocative reframings is the relationship between AI and the physical economy. The conventional narrative casts AI as a dematerializing, deflationary force. Jenkins and Stancikas invert it.
"The extractive nature of an activity like AI via its power consumption and use of raw materials is shielded from view," they observe. AI capex in the US is currently running at 8% of GDP in real terms — in line with the railway boom and the post-war interstate highway buildout. But with chip depreciation factored in, "it is the most intense in history."
The implication for commodities — copper especially — is direct. AI data centers are copper-intensive. The grid buildout required to power them is copper-intensive. The energy transition accelerating in the wake of the Iran shock is copper-intensive. Defense spending, another structural growth driver, adds further inelastic demand. S&P Global projects copper demand from construction roughly flat through 2040, while demand from electrification and the energy transition grows nearly 60% over the same period.
Meanwhile, supply is structurally constrained by aging mines, rising operational costs, and declining exploration. The supply gap is projected to widen materially through the next decade. "EVs require 2.9 times more copper than a conventional car," Jenkins and Stancikas note, citing S&P Global — and that doesn't include charging infrastructure.
Gold Is Money. Everything Else Is a Commodity.
One of the paper's more intellectually precise moves is redefining gold. AB has been positive on gold since 2019, and that view stands. But they argue it no longer belongs in the commodity bucket.
"Geopolitics plus government debt levels make gold more akin to money than a commodity," they write. With G7 fiscal sustainability deteriorating and trust in the US institutional framework eroding, gold functions as a non-fiat reserve asset — more like cash than copper. The practical implication: a portfolio's gold allocation and its commodity allocation need to be managed separately, with different strategic rationales.
The Dollar Tailwind Hiding in Plain Sight
Commodity indices have shown persistently negative correlation with the US dollar — a relationship that has strengthened over the past fifteen years. That's important because AB believes we've hit "peak dollar" — not in exchange rate terms necessarily, but in terms of its share of central bank reserves and international transactions.
"We do think that the net result is that the dollar will slowly lose its status as a safe-haven asset," Jenkins and Stancikas write. The structural appreciation of the dollar since 2010 was a headwind for commodity returns. If that regime reverses, it becomes a tailwind. The US dollar's real effective exchange rate remains above historical average — suggesting the potential for further weakening is real.
Implementation: Industrial Metals, Copper, and Latin America
The paper's final section addresses the practical "how" — and here the argument sharpens. Jenkins and Stancikas are skeptical of simply buying a broad commodity index, noting that heavy energy weightings may not be appropriate for a portfolio built around structural rather than cyclical exposures. Their preferred implementation axis is industrial metals, with copper as the most specific and actionable expression.
For equity investors, metals and mining stocks outperform industrial metals futures during inflationary expansion periods and provide better protection in stagflationary contractions — with the added benefit of dividend income. Valuations remain undemanding, trading at a discount to the broader market on forward PE, with earnings revisions turning positive since mid-2025.
One tactical caveat: futures positioning in copper is nearly two standard deviations above its historical average. Near-term risk is real, especially if the Iran shock morphs into a broader growth slowdown. "Time horizon matters a lot," the authors note.
A regional alternative: Latin America. As a key exporter of oil, copper, and agriculture, the region benefits from both commodity price appreciation and dollar weakness. It trades at a discount to global equities, offers a dividend yield pickup, and has not recovered the structural outflows since 2010 — meaning positioning is not crowded.
Five Actionable Takeaways for Advisors and Investors
1. Treat commodities as a distinct strategic allocation — not a satellite. The confluence of AI capex, deglobalization, and dollar debasement creates a structural case that goes beyond tactical inflation hedging. Industrial metals, separate from gold, deserve a defined portfolio weight.
2. Separate your gold allocation from your commodity allocation. Gold is functioning as money under current fiscal and geopolitical conditions. Mixing it with commodity exposure conflates two very different portfolio roles with two very different drivers.
3. Copper is the most actionable single-commodity expression of multiple structural themes simultaneously — AI infrastructure, energy transition, defense spending, and supply scarcity. Both equity (COPX) and futures (CPER) routes exist; equity offers income and historically better inflation-regime performance, but carries more volatility.
4. Watch the cycle before adding copper today. Futures positioning is elevated and the near-term macro is complicated by the Iran shock's growth implications. A dollar-cost averaging or staged entry approach is prudent given tactical headwinds even if the structural case is compelling.
5. Consider Latin America as a commodity-linked equity implementation. The region offers commodity beta, dollar-weakness sensitivity, discount valuations, higher dividend yield, and uncrowded positioning — a potentially efficient way to access the physical economy theme through equities rather than futures.
The AB paper is for investment professional use only and does not constitute investment advice.
Footnote:
1 "Commodities, Real Assets and the Return of the Physical Economy" — AllianceBernstein, May 2026. Authors: Inigo Fraser Jenkins and Robertas Stancikas.
