Onome Amuge
Global commodity markets are heading for their heaviest and most prolonged downturn since the mid-2010s, with prices expected to fall to a six-year low by 2026, the World Bank warned in its latest Commodity Markets Outlook. The slide marks the fourth consecutive annual decline, underscoring the toll of sluggish global growth, expanding oil surpluses, and persistent policy uncertainty.
The report forecasts overall commodity prices to fall 7 per cent in both 2025 and 2026, even as some high-profile exceptions, notably gold, silver, and key metals tied to artificial intelligence infrastructure, continue to climb.
Despite the declines, prices will remain above pre-pandemic levels. The World Bank expects commodity prices to stay 23 per cent higher than 2019 levels in 2025 and 14 per cent higher in 2026, showing how structural supply constraints and a decade of underinvestment in production continue to buffer markets from a deeper crash.
The most significant correction is expected in the energy complex, where Brent crude is projected to average $68 a barrel in 2025, before dropping to $60 in 2026, its lowest since 2020. The report cites sluggish demand growth, a ballooning oil glut now 65 per cent larger than its 2020 peak, and the continued rise of electric and hybrid vehicles as the main factors behind the slide.
Oil’s weakening fundamentals are compounded by stagnant consumption in China, where industrial output has plateaued and petrochemical demand remains soft. The World Bank estimates global energy prices will fall 12 per cent in 2025 and a further 10 per cent in 2026, as oversupply persists.
For oil exporters, including Nigeria, Angola, and Saudi Arabia, the outlook signals mounting fiscal strain. Lower oil prices threaten to widen budget deficits, deplete reserves, and stall investment in energy transition projects. Economists warn that the decline could also complicate OPEC+ coordination, as members diverge over output targets.
“Commodity markets are helping to stabilise the global economy. Falling energy prices have contributed to the decline in global consumer-price inflation. But this respite will not last. Governments should use it to get their fiscal house in order, make economies business-ready, and accelerate trade and investment,” said Indermit Gill, the World Bank’s Chief Economist.
By contrast, the metals segment, particularly precious and industrial metals linked to the digital economy, is defying the downturn. Gold is expected to jump 42 per cent in 2025, followed by another 5 per cent gain in 2026, driven by central bank accumulation, geopolitical uncertainty, and investor demand for safe-haven assets.
Silver, too, is projected to rise 34 per cent this year and a further 8 per cent in 2026, supported by its dual role as both a monetary metal and a critical input in solar panels and electronic components.
Meanwhile, base metals such as aluminium and copper, crucial for AI data centres, renewable power grids, and electric vehicles, may see renewed support despite broader commodity weakness. Analysts expect the AI boom and accelerating electrification to underpin demand for these metals, even as traditional construction-related consumption slows.
In the agricultural sector, global food prices are expected to ease after years of volatility. The World Bank projects a 6.1 per cent decline in 2025 and a further 0.3 per cent dip in 2026, led by cheaper rice, wheat, and soybeans. These trends have helped moderate inflation in several emerging markets and improve affordability in import-dependent economies.
But the relief is uneven. A projected 21 per cent surge in fertilizer prices in 2025, the heaviest in four years, threatens to erode farmers’ profit margins and offset gains from cheaper crops. Fertilizer costs have been driven up by higher energy input prices, supply chain bottlenecks, and renewed trade restrictions, particularly from Russia and China.
“Even as global food prices decline, the sharp increase in fertilizer costs poses a risk to production incentives and food security,” the report warns.
Coffee and cocoa markets, which experienced weather-driven price spikes in 2024 and 2025, are also expected to soften next year as supply conditions normalize. However, the World Bank cautions that climate volatility, including a potentially stronger La Niña, could still disrupt harvests and drive regional price surges.
The Bank’s economists see the downturn as both a warning and an opportunity for developing economies. “Lower oil prices provide a timely opportunity for developing economies to advance fiscal reforms that promote growth and job creation,” said Ayhan Kose, Deputy Chief Economist and Director of the Prospects Group.
He noted that phasing out costly fuel subsidies could free up resources for infrastructure and human capital investment. Such measures, he said, would shift spending from consumption to investment, rebuilding fiscal space while supporting more durable job creation.
For commodity-dependent economies, particularly in Sub-Saharan Africa and Latin America, the decline in export revenues could heighten external vulnerabilities. The IMF estimates that every $10 drop in oil prices cuts fiscal revenue by 0.3–0.5 per cent of GDP in major exporters, putting pressure on exchange rates and sovereign borrowing costs.
Yet, the World Bank report noted that the long-term solution lies not in market intervention but in diversification, transparency, and innovation. Its special focus section reviews decades of international commodity agreements, from coffee and cocoa to oil, concluding that most have failed to deliver lasting stability.
Even the Organization of the Petroleum Exporting Countries (OPEC), described as the most enduring of such frameworks, has struggled to sustain market control during price booms, as high prices attract new competitors.
Instead, the Bank recommends countries invest in technology, enhance data transparency, and encourage market-based pricing to build resilience to volatility.
Despite the broadly bearish tone, the World Bank highlights several wildcards that could reverse or amplify the forecast trends. Geopolitical conflicts, new sanctions, or unexpected supply disruptions could lift oil and gas prices, while escalating tensions might further fuel demand for gold and silver.
Conversely, a deeper-than-expected slowdown in China or prolonged trade disputes could accelerate the fall in commodity prices.
