There’s nothing like global conflict, especially in the Middle East, to send commodity prices higher.
Although gold, the ultimate fear trade to some, is down 18.27% from its January 29 peak through March 26, the S&P GSCI index is up more than 30% for the year, having gained about 20% since the US and Israel first struck Iran on February 28.
The spike in oil prices is obviously a big part of this. Iran has closed the Strait of Hormuz, through which passes 20% (20 million barrels) of daily global oil consumption. Besides oil, around 20% of the world’s liquified natural gas and more than 30% of the world’s fertilizer (made from natural gas) flows through the strait under normal conditions.
These conditions, have, unsurprisingly, been a boon to commodity fund managers with the average fund in the Morningstar Commodities, Broad Basket category up 19.13% for the year through March 24.
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For some investors, shorter‑term gains will not sway them from a belief that commodities burn capital over the long run. Technology improves, and prices of raw materials decline, despite moments like this when war impedes production, shipment, processing, or all three. They might also point to the problems inherent in tracking spot prices with futures contracts, namely negative roll yield. That’s when a commodity is in ‘contango’ with higher longer‑term contract prices, forcing an investor seeking to maintain a position to sell cheaper expiring contracts and buy more expensive longer‑dated contracts.
Commodity bulls, however, will argue that nobody knows if long‑term declines in prices are changing, and that this is in not just a near‑term play. For the five years through March 24, the average fund in Morningstar’s Commodities, Broad Basket fund category has returned 13.8% on an annualized basis. Even the worst fund over that period produced an 9.1% annualized return.
Beyond this year’s rally, some parts of the five‑year performance likely has to do with the buildout of AI, which will consume massive amounts of energy. So, in this case, technological advances may be pushing some commodity prices higher, at least for the time being.
In light of all this, we took at look at the 10 best and 10 worst‑performing funds in Morningstar’s Commodity, Broad Basket category for the three‑year period through March 24.
As always investors will have to decide where we are in a commodity cycle, or whether something has turned and commodities are set for longer term price appreciation. They will also have to decide which strategy is best equipped to deal with roll yield issues.
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HGER Average Annual Returns as of 3/31/26
Important Information
Commodity Risk: The Fund has exposure to commodities through its and/or the Subsidiary’s investments in commodity-linked derivative instruments. Authorized Participant Concentration/Trading Risk: Only authorized participants (“APs”) may engage in creation or redemption transactions directly with the Fund. Commodity-Linked Derivatives Risk: The Fund’s investments in commodity-linked derivative instruments (either directly or through the Subsidiary) and the tracking of an Index comprised of commodity futures may subject the Fund to significantly greater volatility than investments in traditional securities.