For some time, global markets have been transitioning to an era of scarcity for commodities and the broad natural resource economy. This era has now arrived, as evidenced by last year’s price increases in key industrial metals, such as copper and aluminium, and oil price volatility sparked by the war in Iran.
The impact on equity markets is hard to miss. While overall returns for the S&P 500 index were negative through the first quarter of 2026, ‘old economy’ companies across energy, materials and industrial sectors were notably positive.
This resurgence in real assets even has a catchy new phrase – ‘heavy assets, low obsolescence’ leading to the so-called ‘HALO’ stocks. The AI revolution is certainly here to stay but it cannot happen without significant new supplies of critical metals and minerals, not to mention more power generation and cooling equipment.
Today’s focus on the physical economy comes on the heels of an ‘era of abundance’. In a globalised economy – marked by just-in time deliveries of critical resources and geopolitical stability – there was widespread complacency about energy, metals and agriculture supplies.
That world has noticeably changed. In today’s ‘era of scarcity’, energy and commodity shocks are on the rise, driven by resource protectionism, geopolitical tensions and armed conflicts. Over the last five years, these jolts came in waves, starting with the global pandemic (2020), then the war in Ukraine (2023), tariffs (2025) and now the war in the Middle East (2026). These shocks revealed that highly efficient supply chains were also pretty precarious.
The emphasis now is on building more robust supply chains with redundancies in the system. It requires tapping new energy supplies, both at home and abroad, jumpstarting new mines for critical metals and re-tooling the agriculture sector.
Mounting demand requires dependable supplies
Today’s rising need for more energy, metals and agriculture has its roots in a growing stack of structural demand drivers – all turbocharged by a rapidly-growing global middle class.
Beyond core economic growth, our demand vectors include ‘energy addition’ – this includes alternative sources (from solar to wind and nuclear) and traditional energy supplies; AI technologies and data-centres; and military defence buildouts. These overlapping demands require more natural resources than current projected supplies can meet – in what are already depleting sectors.
Electricity demand from global data-centres, for example, is forecast to triple by 2040, with total installed capacity reaching 550 gigawatts – more than five times 2022 levels. At the same time, estimates of future defence spending could reach $6tn (£4.5tn) by 2040 amid rising international tensions. Bear in mind, even higher spending is possible given the proposed $1.5tn US military budget recently proposed for 2027.
“The AI revolution is here to stay but it cannot happen without significant new supplies of critical metals and minerals, not to mention more power generation and cooling equipment.
The growing supply-demand imbalance has led many analysts to think copper may become the ‘new gold’ in terms of price increases.”
By way of another example, new data-centres and defence spending represent a combined increase of 3.5 million metric tons (MMt) of new annual copper demand by 2040. In a market that is already facing a 10MMt copper supply gap from factors such as expanding power grids and electric vehicles, this amplifies the shortfall.
While demand is soaring, a key supply problem is that existing copper mines are growing older and less productive and kick-starting new mines requires major permitting reforms. The growing supply-demand imbalance has led many analysts to think copper may become the ‘new gold’ in terms of price increases.
In the near term, more expensive copper creates price frictions for energy grid and data-centre developers, impacting consumers with stickier inflation. By contrast, the war in Iran created price shocks that global consumers felt right away – either at the gas pump filling up cars, or from travel restrictions and work-from-home mandates across Asia.
Safeguarding critical metal supplies
Last year’s historic rally for metals saw some of the largest price increases in more than a decade. Silver, cobalt and gold, among others, climbed 148%, 118% and 65%, respectively. This price rally underscores our ‘era of scarcity’ thesis, where accelerating structural demands are running headfirst into shortages that will take years to reverse.
Consider recent armed conflicts and rising demand for military drones, first accelerated by the war in Ukraine and continuing now in the Middle East. Drones are a rapidly-growing military technology that is reshaping how conflicts are waged.
These drones often contain carbon fibre, rare-earth magnets, lithium-ion cells and gallium-nitride chips – all comprised of key metals and minerals that originate from refineries and processors, often in China.
As these conflicts illustrate, disruptions to metal supplies can be a national security threat, not to mention economically damaging. Restricting access to metals with export controls re-emphasises the need for ‘friend-shoring’ and bringing resource production back home.
Trade frictions tighten metals supply
Efforts to deglobalise metal supplies are now accelerating. Friend-shoring among countries with similar economic values, such as the US, Japan and Australia, is taking hold. That said, bringing supplies closer to home can be a long and expensive endeavour. Consider the critical mineral antimony. It is a key input for the defence industry, including armour-piercing ammunition, missiles, night vision goggles, infrared sensors and precision optics.
In 2025, China mined 36% of the world’s antinomy, while processing nearly 74% of global supplies. At this scale, China can withhold access to antimony, giving it geopolitical leverage by releasing or withholding flows. Indeed, China barred antimony exports to the US in December 2024, before suspending the ban in November 2025 for a year as a trade truce, triggering a rollercoaster in antimony prices.
In the US, Perpetua Resources plans to reopen the Stibnite Gold Mine in Idaho by 2029, having completed an eight-year permitting process, and receiving $24.8m from the US Department of defence, and a $2.7bn loan from the US Export Import Bank to help finance the project.
For mining shareholders who have been adamant that CEOs embrace more capital discipline, government investments are welcome, if future company profits also flow back to everyday investors.
Allocations to natural resource equities offer investors a way to benefit from the AI revolution – but at far more attractive valuations compared with broad equities.”
US president Donald Trump’s tariff regime, which aims to deglobalise and reshore supplies, is shaped by a strategic focus on securing critical metals and minerals. The strategy includes rebuilding both domestic and allied production capacity abroad for natural resources that are essential to energy, defence and advanced manufacturing.
The shift to an era of scarcity is here to stay, as investment cycles become longer and deeper. Despite the strong performance of natural resource equities in 2025, these companies still trade at attractive absolute and relative valuations, offering further upside potential. Allocations to natural resource equities offer investors a way to benefit from the AI revolution – but at far more attractive valuations compared with broad equities.
Ultimately, resource equities offer much-needed diversification and attractive levels of sensitivity to inflation – particularly when it surprises to the upside – plus the ability to participate in the energy boom across traditional and alternative sources. With equity volatility on the rise, harnessing these long-term demand drivers inside portfolios can help clients feel more confident about both the future and their portfolios.
Tyler Rosenlicht is head of natural resources at Cohen & Steers
