Published on: 2025-04-15
Updated on: 2025-11-17
Commodities power the world, literally. Every home, factory, vehicle, and digital device ultimately relies on raw materials that move through global markets every day. At the heart of this movement is the commodities market, a system enabling producers, buyers, traders, and investors to exchange goods ranging from crude oil and copper to coffee.
But if you're only getting into commodities or even if you trade regularly, the question always begins the same: "What exactly can be traded in a commodities market, and why do these markets matter so much today?"
This guide explores each major commodity category, explains how trading functions, examines the key price drivers, and analyses how the evolving global economy in 2025 is transforming the market landscape.
At its core, a commodities market is a platform, whether physical or digital, where raw materials are exchanged. These markets are essential for:
Price discovery
Risk management through hedging
Liquidity for global supply chains
Speculation and investment
Commodities fall into two broad groups:
Natural resources extracted from the earth, such as oil, natural gas, copper, gold, aluminium, and nickel
Agricultural or livestock products such as wheat, coffee, cocoa, sugar, cotton, cattle
Trading occurs in both spot markets, which involve immediate delivery, and derivatives markets, including futures and options. Globally, futures trading now leads in volume as it enables participants to hedge against price volatility and speculate without owning the physical commodities.
In 2025, commodities will remain at the heart of inflation dynamics, supply chain geopolitics, and global growth forecasts, making a clear understanding of traded assets more crucial than ever.
Presented below is a comprehensive breakdown of the key commodity groups, along with insights into how the economic landscape of 2025 is influencing demand and price dynamics.
Energy is the largest and most actively traded commodity category.
Key products include:
Oil remains the world's most influential commodity. In 2025:
Brent crude is trading around the low–mid USD 60s
OPEC+ production policy continues to drive volatility
Slowing global manufacturing demand has moderated price spikes
Oil is used for transportation, plastics, chemicals, and heating, affecting nearly every industry.
A critical fuel for heating, power generation, and industrial use.
U.S. natural gas prices remain moderate due to strong production
European gas markets stay sensitive to winter demand
Asian LNG demand continues rising, with China and India's consumption
Gasoline
Heating oil
Diesel
Refined products track crude oil but also respond to refinery capacity, seasonal patterns, and logistics.
Why energy matters in 2025:
Since 2022, energy has been a significant factor contributing to inflation. Even in 2025, markets remain highly reactive to supply disruptions, geopolitical risk, and OPEC decisions.
Metals are split into two broad categories, each with distinct investor appeal.
These store value, hedge inflation, and offer safe-haven demand.
Gold's role strengthened in 2025 amid central bank buying and global uncertainty. Prices remain elevated above the USD 4,000/oz levels seen earlier in the year.
Silver is driven by both investment and industrial demand (solar, electronics).
Used heavily in catalytic converters.
The demand is changing due to the surge in electric vehicles, although supply limitations remain significant.
These metals fluctuate with global economic cycles.
Widely used in construction, EVs, and power grids, the ultimate economic bellwether.
Prices remain supported by robust demand despite a decline in global PMIs.
Key for transportation, packaging, and aircraft manufacturing.
Energy expenses in Europe and China are constrained by availability.
Used in batteries, galvanising, and manufacturing.
Nickel prices remain volatile as Indonesian supply rises.
Why metals matter today:
AI infrastructure, energy transition investments, and grid upgrades have boosted base metal demand globally, even as broader manufacturing weakens.
Agriculture remains one of the most diverse commodity groups, and one of the most weather-sensitive.
Wheat
Corn
Soybeans
Rice
2025 production has been shaped by erratic weather patterns and shifting global demand. The El Niño/La Niña cycle continues to influence harvest yields.
• Coffee: It is very susceptible to frost and drought in Brazil
• Cocoa: prices surged in 2024–25 due to supply shortages
• Sugar: influenced by India and Brazil's harvest cycles
• Cotton: tied to textile demand and global retail trends
Agricultural prices tend to react most rapidly when weather conditions impact supply or geopolitical tensions interrupt trade routes.
Livestock markets include:
Live cattle
Feeder cattle
Lean hogs
Feed costs, disease outbreaks, and shifts in meat consumption all influence prices.
Rising grain prices in 2025 have put upward pressure on livestock costs globally.
Lumber and pulp are crucial for building and paper manufacturing.
Lumber prices remain volatile, tracking U.S. housing demand
Pulp markets respond to packaging trends and environmental regulations
Beyond the major groups, several niche commodities are traded globally:
Rubber: Key for tyre production
Wool: Textile industry demand
Dairy products: Milk, cheese, butter, skimmed products
Each has its own supply dynamics, often tied to climate, feed costs, and consumer trends.
Immediate settlement based on current market prices.
Standardised contracts traded on major exchanges.
Most global commodity trading volume flows through futures.
Used to hedge exposure with optionality and lower capital requirements.
Allow investors to gain exposure without handling physical goods.
Commodity prices move with:
The most fundamental factor. When supply tightens or demand surges, prices rise.
Wars, sanctions, trade disputes, and political instability can disrupt production or shipping.
Agricultural and soft commodities are extremely climate-sensitive.
Most commodities are priced in USD.
A strong USD often puts downward pressure on global commodity prices.
Inflation, interest rates, global PMIs, and growth expectations all influence demand.
In 2025, commodity markets will remain highly sensitive to:
China's uneven recovery
OPEC policies
The global transition to clean energy
Climate-driven supply disruptions
In conclusion, commodities are the core of global trade, inflation, and economic growth. In 2025, their dynamics are shaped by electrification, the energy transition, shifting weather patterns, and cyclical elements such as declining PMIs and geopolitical uncertainties.
Understanding what can be traded in a commodities market is the first step. Understanding why it matters now is where smart investors differentiate themselves.
Not necessarily. According to the World Bank's 2025 outlook, global commodity prices are projected to fall by around 12% this year.
The projected drop is largely due to oversupply, particularly in oil, as well as weaker global demand.
Yes. Gold is the universal choice, but energy commodities may not hedge inflation well if their prices decline.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
