Commodities Crash? Prices to Hit Six-Year Low by 2026, Says World Bank
- Volatility and Declines Define New Era in Commodity Markets
Global commodity prices are poised to tumble to their lowest levels since 2020 by 2026, signalling temporary relief for inflationary pressures linked to escalating trade tensions—but also heralding fresh challenges for commodity-dependent economies, particularly in the developing world.
According to the World Bank’s Commodity Markets Outlook released in April 2025, prices are projected to fall 12% in 2025 and a further 5% in 2026. The result would mark a definitive end to the recent commodity supercycle that was spurred by post-pandemic recovery and Russia’s 2022 invasion of Ukraine.
Though nominal prices will remain above pre-pandemic levels, inflation-adjusted commodity prices are forecast to dip below the 2015–2019 average for the first time. For developing economies, two-thirds of which are commodity exporters, the downturn could tighten fiscal space, depress investment, and complicate poverty-reduction efforts.
“Higher commodity prices have been a boon for many developing economies,” said Indermit Gill, the World Bank’s Chief Economist. “But the combination of high price volatility and low prices spells trouble. Developing economies will need to restore fiscal discipline, attract private capital, and liberalise trade to weather the storm.”
Energy and Oil Drive Broad-Based Decline
Energy prices are set to fall the most sharply. The World Bank projects a 17% drop in 2025, followed by a further 6% decline in 2026, driven by tepid demand growth and robust global supply. Brent crude oil is forecast to average $64 per barrel in 2025, down $17 from 2024, with prices dipping further to $60 in 2026.
Coal prices are also expected to plunge, down 27% this year and 5% next, amid slowing consumption growth for power generation in developing countries. Meanwhile, the shift to renewable energy and rapid adoption of electric vehicles (EVs) is eating into long-term fossil fuel demand. In China, EVs now constitute over 40% of new vehicle purchases—nearly triple the share in 2021.
These trends are putting downward pressure on inflation globally. In 2022, energy price spikes added more than two percentage points to global inflation. But since 2023, the cooling in energy markets has acted as a deflationary force.
“The softening of energy prices could buffer some of the inflationary effects of rising tariffs and protectionist trade policies,” the report notes.
Food Prices Fall, but Hunger Risks Persist
Food prices are forecast to drop 7% in 2025 and another 1% in 2026, easing costs for importers and potentially benefiting humanitarian operations. Yet, the gains may be short-lived for regions grappling with conflict-driven hunger. The UN estimates that acute food insecurity will affect 170 million people across 22 fragile states this year.
The World Bank cautions that while falling food prices offer short-term relief, they will not address the structural drivers of hunger, including displacement, climate shocks, and war.
Gold Defies the Downturn, Industrial Metals Weaken
In contrast to other commodities, gold prices are expected to reach new nominal highs in 2025, reflecting heightened investor demand for safe-haven assets amid global uncertainty. The precious metal’s price will remain approximately 150% above its 2015–2019 average over the next two years.
Industrial metals, however, are expected to experience a significant correction due to cooling demand from China, particularly from its embattled property sector, and the dampening effect of trade restrictions.
“Metal demand is being undermined by mounting trade tensions and weak industrial activity,” said Ayhan Kose, the Bank’s Deputy Chief Economist.
Commodity Booms Getting Shorter and Sharper
The World Bank’s analysis highlights an alarming trend: commodity cycles are becoming shorter, steeper, and more destabilising. Historically, commodity booms and busts have lasted about four years on average, but between 2020 and 2024, that duration has halved, exacerbating fiscal planning risks.
This rapid whipsawing—prices plunging during the pandemic, surging post-Ukraine invasion, then falling again— has created volatile conditions that erode macroeconomic stability, particularly in countries heavily reliant on commodity revenues.
“We may be entering a new normal where commodity markets are defined more by volatility than predictability,” said Kose. “Developing economies must build buffers, improve institutions, and enable private investment to withstand future shocks.”
Policy Imperatives for Commodity Exporters
As the global economy transitions into a period of lower commodity prices and sustained volatility, the World Bank urges exporting countries to recalibrate their economic frameworks. Specifically, it recommends:
- Restoring fiscal discipline to rebuild buffers;
- Attracting private investment through regulatory clarity and infrastructure reforms;
- We are leveraging trade liberalisation to diversify markets and reduce vulnerability to external shocks.
Failure to act, the report warns, could leave countries more exposed to external headwinds, hampering long-term development goals and resilience-building.
