Key Points:

• Energy remains the epicentre, but weekly price action shows the shock is spreading into metals and agriculture through cost channels 
• Fertilizer, freight and petrochemicals are driving a second-round inflation wave with growing implications for food and consumer goods 
• Asian economies are structurally exposed given their heavy reliance on Middle Eastern crude flows through Hormuz 
• Negotiations show limited progress, leaving markets focused on physical tightness rather than political headlines

The Bloomberg Commodity Total Return Index trades near unchanged on the week, with declines in energy and precious metals partly offset by gains in industrial metals and agriculture. However, the conflict is on track to lift the index which tracks 26 major commodity futures by 10% this month with a near 41% increase in the energy subindex and broad gains across the agriculture sector being only partly offset by an 18% slump in precious metals, and a near 5% drop in the industrial metal index where broad weakness, except supply disrupted aluminum, was driven by rising growth concerns.

Returning to the current week, which on the surface suggests a degree of consolidation following recent volatility, supported in part by signs that diplomatic efforts - so far largely via backchannels - have been stepped up. However, with no clear path to a solution that accommodates both sides, the duration of what is already the largest supply disruption on record continues to extend. As a result, the market is transitioning from an initial shock phase into a broader and more complex adjustment process, fuelling concerns about global growth and inflation and forcing financial markets to adjust accordingly.

Energy prices have eased modestly, with Brent and WTI both down around 3% in the week. Yet this follows a near-vertical repricing over the past month, with Brent up nearly 46% and heading for its biggest monthly rise on record, and diesel-related products posting gains above 60%. The latest pullback therefore appears more technical than fundamental, reflecting position adjustment and shifting rhetoric and most certainly not any meaningful easing in physical tightness.

Precious metals have also weakened, with gold down 2.5% and platinum-group metals under heavier pressure. This reflects a continuation of the recent liquidity-driven correction, where rising yields, a firmer dollar and broader macro stress have overshadowed safe-haven demand and the broader and long-term investment case for hard assets.

By contrast, industrial metals and agriculture are now beginning to absorb the second-round effects of the energy shock. Copper, aluminum and zinc have posted weekly gains, while grains and softs are broadly higher, signalling a shift in market focus from immediate supply disruption to rising input costs and future production risks.

Negotiations: limited progress, high uncertainty

Recent developments suggest some level of diplomatic engagement, with the U.S. delaying potential strikes on Iran’s energy infrastructure while talks are ongoing. However, statements from Iran indicate that there is no agreed framework for negotiations and that proposals on the table remain unacceptable.

This divergence in messaging highlights the fragile nature of the current situation. While selective tanker movements and temporary pauses in escalation may offer short-term relief, there is yet no clear path toward a durable resolution.

Energy: from price spike to supply squeeze

The past month has seen energy markets undergo a regime shift. What began as a geopolitical risk premium has evolved into a tangible supply shock, driven by the effective disruption of flows through the Strait of Hormuz.

A critical development now unfolding is the depletion of “oil on water.” Tankers that departed the Gulf prior to the escalation have largely completed their journeys and discharged cargoes. With limited new supply entering the market, the buffer that initially dampened price spikes is rapidly eroding.

At the same time, rerouting of vessels around the Cape of Good Hope has extended shipping times and increased costs, tightening prompt availability of both crude and refined products. This is most clearly reflected in the continued strength of diesel and jet fuel markets, where prices remain significantly elevated relative to crude, all highlighting how the market is transitioning from a futures-driven risk repricing to a physical shortage dynamic.

Why Asia is at the centre of the risk

One of the defining features of the current crisis is the asymmetric exposure across regions, with Asia emerging as the most strategically vulnerable. This is not a new development but rather the result of long-established trade flows. Prior to the war, roughly 80% of the crude passing through the Strait of Hormuz was destined for Asian refineries. Japan and South Korea sourced more than 90% and 70% of their crude imports, respectively, from the Gulf, while China and India -  despite diversification efforts - still rely on the Middle East for around half of their oil imports.

This concentration creates a structural fragility. Unlike Europe, which has partly reconfigured supply chains following the loss of Russian energy, or the U.S., which benefits from domestic production, large parts of Asia remain critically dependent on uninterrupted Gulf flows. As a result, disruptions in Hormuz do not just lift global prices; they create acute regional supply stress, forcing Asian buyers to bid aggressively for alternative cargoes, thereby amplifying global price dislocations.

Second-round effects: the shock spreads: The most important development now is that the energy shock is no longer contained within oil and gas markets. It is cascading through the global commodity complex via several key channels. In a recent report, Goldman Sachs says the Middle East conflict has created significant disruptions, with roughly 80% of the components in the Bloomberg Commodity Index (BCOM) basket being directly or indirectly exposed, either through direct supply losses or secondary effects caused by these. 

Fertilizer and food: The Gulf region plays a dominant role in global fertilizer exports, particularly urea and ammonia, both of which rely heavily on natural gas as feedstock. Disruptions to exports have already triggered a sharp rise in fertilizer prices, raising concerns about crop yields in major producing regions such as Brazil, India and the United States.

Given the well-established relationship between energy and food prices - with energy costs influencing a majority of food production and distribution expenses - this creates a clear pathway for broader food inflation in the months ahead.

Petrochemicals and consumer goods: Rising prices for naphtha and other petrochemical feedstocks are beginning to impact the cost of plastics and packaging. This represents an early-stage inflation impulse that will likely feed into a wide range of consumer goods, extending the reach of the current shock beyond raw materials markets.

Freight and logistics: Shipping disruptions and longer transit routes have effectively introduced a “logistics tax” on global trade. Higher fuel consumption, increased insurance costs and longer delivery times are all contributing to rising transportation costs, reinforcing inflationary pressures across supply chains.

Agriculture: early signs of a tightening cycle

The agriculture sector is beginning to reflect these second-round dynamics. Weekly gains across wheat, corn and soybean products highlight growing concerns around input costs and supply risks. Wheat in particular is also being supported by drought concerns in the U.S. Plains, with forecasts now showing limited chances of rain before early April and hot weather expected this week, which is likely to exacerbate dryness.

Besides cotton, which is benefitting from surging energy prices given the link to synthetic fibers, the alternative to cotton, a particularly notable development is in the sugar market where prices have reversed higher following a month-long slump to now challenge a long-established downtrend, as higher energy prices alter production economics.

Brazil, the world’s largest sugar producer and exporter, is expected to cut shipments in the 2026/27 season by 14.2%, according to Safras & Mercado. Mills are increasingly diverting sugarcane toward ethanol production to capture higher returns from biofuels linked to elevated energy prices. Total exports are projected at 29 million tons, down from 33.8 million tons in the previous season.

This shift illustrates a key mechanism through which energy markets influence agriculture: when fuel prices rise, biofuel demand increases, reducing food supply and supporting prices. It is a classic example of how energy shocks propagate into food markets.

Industrial metals: cost support over demand

Industrial metals have shown relative resilience on the week, with gains across most of the complex. However, this strength may not necessarily signal growth optimism, although the recent price slump seems to have reignited or triggered some pent-up demand for copper in China where stockpiles monitored by the Shanghai Futures Exchange following 14 weeks of rising stocks has seen a 17% drop in the past two weeks. 

Instead, it reflects rising production costs, particularly energy-intensive smelting operations, as well as logistical constraints. Higher electricity and fuel costs are effectively raising the marginal cost of supply, providing a floor under prices even in the absence of strong demand growth. This dynamic underscores a broader theme: commodities are responding to supply-side pressures rather than demand-driven expansion.

Precious metals: liquidity over geopolitics

Gold and silver has come under considerable pressure as the Middle East war triggered a broad macroeconomic shock across global markets, forcing investors to simultaneously reprice inflation, rates, growth and liquidity conditions. After many months of strong outperformance, both metals have become vulnerable - not because their strategic case has fundamentally changed, but because they had become crowded longs at a time when investors, and some central banks suddenly needed liquidity. Most notably being the Turkish Central Bank which recently recorded 50 tons drop in its holdings to 772 tons. 

Equity markets have been selling off amid rising growth concerns, as funding costs and bond yields surge on mounting inflation fears following what may be the largest disruption to global fuel supply on record. With limited remaining conventional military capacity, Iran is delivering a broad retaliatory shock through energy markets, with global spillover effects widening - most notably through the repricing of bond yields and rate cut expectations.

A key feature in recent weeks has been the inverse correlation between rising energy prices and falling precious metals. However, there are early signs that this relationship may be starting to ease, which in turn could open the door for renewed demand. For now, however, investors appear reluctant to re-engage with the longer-term hard asset narrative until both macro conditions stabilise and the technical picture turns more supportive.

This week, gold returned to and found support at its 200-day moving average, last at USD 4,113, with resistance near USD 4,600, while ETF outflows persisted - albeit at a slower pace - bringing total net selling this month to 85 tonnes, equivalent to a 2.7% reduction in holdings.  In effect, we believe gold is being sold not because its strategic case has weakened, but because it remains one of the few liquid assets still showing gains over the past year.

Conclusion: a broader inflation cycle emerging

The current market environment is no longer defined solely by an energy price spike. It is evolving into a broader commodity inflation cycle, driven by supply disruptions, rising input costs and tightening logistics.

Weekly price movements may suggest a degree of consolidation, but the underlying trend remains one of increasing systemic strain. With energy at the core and second-round effects gaining traction, the focus is shifting toward how deeply and persistently this shock will impact the global economy.

Until supply flows normalise or a credible diplomatic breakthrough emerges, the risk remains that the current phase represents not a peak, but a transition into a more entrenched inflationary regime across commodities.

Overall, the long-term investment case for commodities remains, and has probably strengthened by events this past month. It’s a sector being underpinned by structural trends such as deglobalisation, rising defence spending, de-dollarisation, decarbonisation and currency debasement, and reinforced by rising power demand, population growth, climate pressures and years of underinvestment by producers.

How to improve the yield on long-term IWDA holdings

The iShares Core MSCI World UCITS ETF (IWDA) is one of the most widely used building blocks in long‑term portfolios. Many investors buy the ETF regularly and hold it for years as a simple way to gain exposure to global equity markets.

For most of that time, the strategy has been straightforward: buy the ETF, hold it, and allow global equity markets to compound over time.

However, a recent development on Euronext Amsterdam introduces a new possibility for some investors. Mini‑options on IWDA now allow option strategies to be applied in much smaller increments than before. In practical terms, this means investors can potentially generate option premium from part of an existing IWDA position without needing a large allocation of ETF units.

For long‑term investors who are comfortable with options, this may offer an additional way to improve the yield of a portfolio holding. At the same time, it is important to understand the trade‑offs involved. The strategy discussed in this article is educational in nature and examples are illustrative only. Options involve risk and require careful consideration before use.

Why IWDA is often a core holding

The iShares Core MSCI World UCITS ETF tracks the MSCI World Index, which represents large and mid‑capitalisation companies across developed markets. The index includes companies from North America, Europe and Asia‑Pacific, providing broad diversification through a single instrument.

Because of this diversification, many investors treat IWDA as a long‑term portfolio foundation. Contributions are often made gradually through regular investing plans, and the ETF is typically held for many years.

In such portfolios, the objective is usually straightforward: participate in global economic growth over time. Investors may focus less on short‑term market fluctuations and more on long‑term compounding.

Yet even within long‑term portfolios, some investors eventually ask a practical question. If an ETF position is intended to be held for years, could it also generate additional income along the way?

Listed options provide one possible approach.

What has changed: mini‑options on IWDA

Options on ETFs are not new. Covered call strategies have been used for decades by investors seeking to generate income from existing holdings.

Traditionally, however, listed options represent 100 units of the underlying asset. This means that a standard option contract on IWDA corresponds to 100 ETF units.

For many investors, that contract size has been a practical barrier. Someone holding 30 or 40 ETF units, for example, simply could not use the strategy because they did not own enough units to cover the contract.

Mini‑options change that dynamic.

On Euronext Amsterdam, IWDA options are now also available with a smaller contract size. Each mini‑option represents 10 ETF units rather than the traditional 100.

The strategy itself has not changed. What has changed is the scale at which it can be applied.

This smaller contract size allows investors to manage exposure in much finer increments, which may make the strategy more practical for a wider range of portfolios.

A practical example of why size matters

Consider a long‑term investor who has gradually accumulated 40 units of IWDA through regular investments.

Under the traditional option structure, this investor would not have been able to sell a covered call because the minimum contract size was 100 units.

With mini‑options, the same investor could potentially sell a call option on 10 units, 20 units, 30 units, or the entire 40‑unit position. In other words, the strategy can be tested on a small portion of the holding rather than the entire allocation.

At the other end of the spectrum, larger investors may also benefit from the flexibility.

Imagine a portfolio holding 1,500 units of IWDA. Instead of covering the position in large blocks of 100 units, mini‑options allow the investor to adjust exposure more precisely. Strike prices can be staggered, expiries can be spread across different dates, and only part of the position can be covered at any given time.

For both smaller and larger investors, the change in contract size simply allows more flexibility in how the strategy is applied.

Understanding the covered call strategy

A covered call is one of the simplest options strategies, although it still requires an understanding of how options work.

In a covered call, an investor owns the underlying asset and sells a call option on that asset. The buyer of the option receives the right to purchase the asset at a predetermined price, known as the strike price, before the option expires.

In exchange for granting this right, the seller receives an option premium.

Because the investor already owns the ETF units, the position is described as "covered". If the option is exercised, the investor can deliver the ETF units they already hold.

The premium received from selling the option is the income component of the strategy.

An illustrative IWDA example

Important note: The strategies and examples provided in this article are purely for educational purposes. They are intended to assist in shaping your thought process and should not be replicated or implemented without careful consideration. Every investor or trader must conduct their own due diligence and take into account their unique financial situation, risk tolerance, and investment objectives before making any decisions. Remember, investing in the stock market carries risk, and it's crucial to make informed decisions.

Assume the following simplified market conditions:

IWDA price: EUR 112.60 Call strike price: EUR 115 Expiry: roughly one month Option premium: EUR 1.35 per ETF unit

One mini‑option contract represents 10 ETF units.

Premium received: EUR 1.35 × 10 = EUR 13.50

Position value

Value of 10 IWDA units: EUR 112.60 × 10 = EUR 1,126

Option yield

Premium relative to the ETF position: EUR 13.50 / EUR 1,126 ≈ 1.2% for roughly one month (illustrative and can be more or less depending on market conditions)

This yield illustrates why some investors consider covered calls on long‑term holdings.

Maximum profit and maximum loss

Maximum profit

Maximum profit occurs if IWDA finishes at or above the strike price (EUR 115) at expiry.

Profit components:

Capital gain: EUR 115 − EUR 112.60 = EUR 2.40 per unit Option premium: EUR 1.35 per unit

Total maximum profit per unit: EUR 2.40 + EUR 1.35 = EUR 3.75 per unit

For the 10‑unit position: EUR 3.75 × 10 = EUR 37.50 maximum profit

Relative to the EUR 1,126 position value, this equals roughly: 3.3% maximum return for the one‑month example.

Maximum loss

The downside risk remains largely the same as owning the ETF.

If IWDA were to fall to zero (a theoretical worst case, which is unlikely to happen with a world-etf), the loss would be the value of the ETF minus the premium received.

Loss per unit: EUR 112.60 − EUR 1.35 = EUR 111.25

For the 10‑unit position: EUR 111.25 × 10 = EUR 1,112.50 maximum loss.

In other words, the option premium provides only a small buffer against declines.

Possible outcomes at expiry

If IWDA remains below EUR 115 until expiry, the option may expire worthless. In that case, the investor keeps the premium and continues to hold the ETF units. Some investors then repeat the strategy by selling a new call option with a later expiry.

If IWDA rises above EUR 115, the option holder may exercise the option. This means the investor may be required to sell the covered ETF units at EUR 115. In that scenario, the investor keeps the premium but does not benefit from price gains above the strike price on the covered portion of the position.

If IWDA declines instead, the premium received provides a small buffer against losses. However, the investor still bears the downside risk of owning the ETF. This is an important point: selling covered calls generates income, but it does not protect against declines in the underlying asset.

The central trade‑off

The logic of the strategy ultimately revolves around a simple exchange.

The investor receives option premium today, but in return accepts that the covered ETF units could be sold at the strike price.

If the ETF rises strongly above that level, the investor gives up some potential upside. If the ETF declines, the premium only partially offsets the loss.

For this reason, some investors view covered calls as a way to enhance income from long‑term holdings rather than as a strategy designed to outperform rising markets.

Practical considerations before using the strategy

Options are complex financial instruments and require careful evaluation before use.

Investors considering covered calls should think about several practical factors, including the possibility of early assignment, the liquidity of the option market, bid–ask spreads, trading costs and the tax treatment of option premiums.

Perhaps most importantly, an investor should be comfortable with the idea of selling the ETF units at the chosen strike price if the option is exercised.

If selling the ETF at that price would be undesirable, the strategy may not be appropriate.

Final thoughts

Mini‑options on IWDA do not introduce a new strategy. Covered calls have been used for decades by investors seeking to generate income from existing holdings.

What has changed is the contract size.

By allowing the strategy to be applied in 10‑unit increments, mini‑options make covered calls accessible to a broader group of IWDA investors. For some, this may offer an additional way to manage the yield of a long‑term ETF position while maintaining exposure to global equity markets.

As always, understanding both the mechanics and the trade‑offs is essential before using options in a portfolio.