The Iran conflict has sent crude prices surging, split hedge fund performance and reignited the debate over commodities as a strategic allocation. Hedgeweek examines what the disruption means for the sector.
The closure of the Strait of Hormuz – the narrow waterway through which roughly a fifth of the world’s oil supply passes – has triggered the most severe supply disruption in the modern history of global energy markets. Since US and Israeli strikes on Iran began on 28 February, the price of a barrel of crude has surged from around $64 in late February to $120, before retreating a bit following comments from President Trump signalling a potential resolution and plans by several countries to release emergency oil reserves.
The International Energy Agency described it as the largest supply disruption on record and promptly released 400 million barrels of oil reserves, the single largest emergency release in energy market history, to stabilise markets after Iran warned that oil could reach $200 a barrel if disruptions continued.
The speed and scale of the move have exposed a sharp divide across the hedge fund industry. Commodity-specialist and macro-focused managers have thrived: Pierre Andurand’s Commodities Discretionary Enhanced fund gained 6% in a single week, rebounding from a bruising 2025 in which it fell as much as 60%. Doug King’s RCMA Capital returned 9.5% over the five days to 6 March, pushing year-to-date performance to around 20%. At the sector level, the HFR Macro: Commodity Index climbed 4.1% in February alone, as trend-following strategies positioned ahead of the conflict.
The large multi-strategy platforms, by contrast, have been on the wrong side of it. Millennium Management is estimated to have lost roughly $1.5bn over the same period. Citadel’s flagship Wellington strategy declined about 2%, with losses partly driven by its macro trading unit. Coatue fell 3.8%, ExodusPoint surrendered its year-to-date gains, and Balyasny dropped 3.5%. DE Shaw’s Composite fund was a rare exception among multi-strats, rising 0.3%.
The financialisation of commodities
For Les Finemore, CEO of Moreton Capital Partners, a newly launched systematic commodities fund operating out of Abu Dhabi and Mexico City, the oil shock seems to have crystallised a thesis that has been building since the pandemic. Commodities, he argues, have become structurally more financialised and macro-sensitive since the supply and demand shocks that Covid inflicted on global markets. The old model – in which traders relied on years of domain expertise and close market relationships to stay ahead – is no longer sufficient to generate true alpha.
Finemore says: “The traders who will win out are the ones who combine deep domain expertise with a systemised, technology-first approach to translating that complexity into investment signals.”
According to him, MCP’s model is designed to do precisely that: translating unstructured data from news outlets, freight shipping records and satellite imagery into operational signals that inform investment decisions across more than 70 commodity markets. It is an approach that contrasts with funds that continue to value commodities primarily through the lens of supply and demand balance sheets. Recent events have reinforced the point. The MSCI commodity index carries a 10-year annualised volatility of around 20%, a figure that understates the severity of the kind of geopolitical shock now playing out in the Gulf.
Allocator appetite: shifting in real time
The performance divergence is sharpening a question that allocators were already beginning to ask. Jon Caplis, CEO and founder of PivotalPath, wrote on LinkedIn that the impact of oil prices on hedge fund strategies “has become the question for allocators.” PivotalPath’s own research supports the claim: in historical periods where crude traded between $100 and $140 a barrel, managed futures strategies returned an average of 9.1% and global macro gained 8.8%.
The data marks a notable shift from the sentiment Hedgeweek® captured at the start of the year. In the Hedgeweek®-AIMA Global Allocator Outlook published in January, global macro emerged as the second most preferred strategy for 2026, with more than half of respondents ranking it among their top two choices. Managed futures and CTAs, however, ranked seventh out of nine strategies, with more than half of allocators placing them in their bottom three. Capital allocation intentions were cautious: 59% of respondents planned to keep their portfolios unchanged.
Six weeks and an oil spike later, the landscape looks different. Finemore says he has seen growing interest from family offices, sovereign wealth funds and large endowments seeking commodity exposure, with appetite for funds that have integrated AI and large language models into their operational workflow. For a commodities fund processing hundreds of thousands of data points across different market environments and political regimes, he argues, a technology-led approach is not a differentiator – it is a prerequisite.
Finemore also notes that many commodity-first hedge funds have historically struggled with negative returns, unable to forecast against extreme price volatility and supply-side shocks. MCP’s response is diversification: by spreading investment across more than 70 commodities and frequently moving in and out of markets, the fund aims to be nimbler than peers with more concentrated books.
The Middle East: business as usual?
As allocators reconsider the role of commodities within portfolios, the geography of the hedge fund industry is also under scrutiny. The Middle East has been building its reputation as a hub for institutional capital, with large multi-strategy firms including Millennium and Brevan Howard establishing significant presences in the UAE. For commodity-focused managers, the region offers proximity to global energy markets, a supportive regulatory environment and close access to institutional capital.
The Iran conflict, however, has tested the region’s image as a haven of stability. Finemore says he has not felt a shift in sentiment from allocators towards the region – if anything, he believes the resolution of the conflict will strengthen the UAE’s position as a centre for large investment vehicles over the long term. That view may prove optimistic, but the operational commitments that firms have already made to the region – with many large macro hedge funds having relocated their main hubs to the UAE – are difficult to reverse and suggest the direction of travel is set.
MCP, which operates a dual-office structure across Abu Dhabi and Mexico City, is betting that it can establish itself as a commodity-specialist leader in a landscape currently dominated by the multi-strat giants. Its Abu Dhabi office, led by COO Alistair Fullerton, is positioned to attract talent leaving Europe, while the Mexico City operation has built a pipeline of quantitative talent through university partnerships – a strategy that would carry a far higher price tag in the US.
Whether MCP’s systematic approach delivers on its thesis remains to be seen. But the broader argument – that commodity markets have become too macro-sensitive, too volatile and too data-intensive for traditional approaches to capture alone – has rarely been illustrated as vividly as it has in the past fortnight.
