Washington D.C., October 29, 2025 – The global economy is bracing for a significant shift as the World Bank's latest Commodity Markets Outlook report forecasts a substantial decline in commodity prices, projecting them to reach their lowest levels in six years by 2026. This anticipated downturn, marking a fourth consecutive year of decline, is driven primarily by anemic global economic growth, a burgeoning oil surplus, and persistent policy uncertainty across key economies.
While offering a measure of relief from inflationary pressures for many nations, this long-term outlook presents a complex and bifurcated landscape for global markets. Developing economies heavily reliant on commodity exports face considerable headwinds, while commodity-importing nations and certain industries stand to benefit from reduced input costs. The report underscores a period of rebalancing, with both challenges and opportunities emerging across various sectors.
The Looming Decline: A Detailed Look at the World Bank's Forecast
The World Bank's comprehensive analysis, released in October 2025, paints a clear picture of broad-based price depreciation across major commodity groups. The overall commodity price index is projected to drop by 7% in both 2025 and 2026. Energy prices are expected to be the primary driver of this decline, with Brent crude oil prices forecast to average $68 per barrel in 2025 before dipping to a five-year low of $60 per barrel in 2026. Overall, energy prices are projected to decrease by 12% in 2025 and a further 10% in 2026. This significant drop is attributed to weaker global oil demand, partly due to the rapid adoption of electric vehicles (EVs), and a growing oil surplus anticipated to outpace demand by 700,000 barrels per day in 2025.
Food prices are also expected to ease, with a projected decline of 6.1% in 2025 and a more modest 0.3% in 2026. This softening in food costs, particularly for staples like rice and soybeans, is largely due to record production and, in some cases, trade tensions. Metal prices are generally expected to slide, with a 10% drop projected for 2025 and a 3% fall in 2026, influenced by a sharper-than-expected slowdown in global economic growth. However, not all commodities will follow this downward trajectory. Precious metals, notably gold and silver, are identified as a significant exception. Gold prices are forecast to jump by 42% in 2025, driven by robust safe-haven demand amidst global uncertainties and continued purchases by central banks, with further increases expected in 2026. Similarly, fertilizer prices are projected to surge by 21% in 2025, reflecting elevated input costs and trade restrictions, before experiencing a slight easing in 2026. Despite the overall decline, the report notes that commodity prices in 2025 and 2026 are still projected to remain significantly above pre-pandemic levels.
The main reasons underpinning this forecasted decline are multifaceted. A pronounced slowdown in global economic activity is a central theme, directly impacting the demand for industrial and energy commodities. The global oil market is grappling with a significant glut, which expanded considerably in 2025 and is anticipated to increase further in 2026. This surplus is exacerbated by a slower growth in oil demand, attributed in part to the rapid adoption of electric and hybrid vehicles and stagnant oil consumption in China. Persistent geopolitical tensions and policy ambiguities also contribute to a cautious economic outlook, deterring investment and dampening demand. For certain agricultural commodities, improved supply conditions are expected to contribute to lower prices.
The immediate implications for global markets are varied. The most immediate positive impact is the contribution of falling energy and food prices to the ongoing moderation of global consumer-price inflation. This offers a much-needed reprieve for central banks navigating a complex economic landscape. However, the forecast presents a significant challenge for developing economies that are net commodity exporters, comprising two-thirds of all developing nations. While lower prices benefit importers, they can severely impact the fiscal health and economic growth prospects of these exporting countries. The World Bank urges these nations to prioritize trade liberalization, restore fiscal discipline, and cultivate environments conducive to business and private investment to mitigate negative impacts.
Winners and Losers: Corporate Fortunes in a Shifting Market
The World Bank's forecast of declining commodity prices by 2026 will undoubtedly create distinct winners and losers among public companies across various sectors. Companies that primarily consume commodities as raw materials or for operational purposes stand to benefit significantly, while those involved in the extraction, production, or direct sale of commodities will likely face reduced revenues and profit margins.
In the energy sector, downstream industries and energy-intensive businesses are poised to win. Airlines such as Delta Air Lines (NYSE: DAL), Southwest Airlines (NYSE: LUV), and JetBlue (NASDAQ: JBLU) will see a direct reduction in their major operating expense – fuel – leading to improved profitability. Similarly, transportation and logistics giants like United Parcel Service (NYSE: UPS) and FedEx Corp. (NYSE: FDX) will benefit from lower fuel costs. Chemical and plastics manufacturers, including Dow Inc. (NYSE: DOW) and LyondellBasell (NYSE: LYB), will see reduced raw material costs as petroleum and natural gas prices fall. Conversely, upstream oil and gas exploration and production (E&P) companies like ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX) will face significant pressure on revenues and operating income due to lower Brent crude prices. Oilfield service providers such as Schlumberger (NYSE: SLB) and Halliburton (NYSE: HAL) will also see reduced demand as E&P firms cut back on drilling and exploration.
The food and agriculture sector will also see a clear divide. Food processing companies like Archer-Daniels-Midland (NYSE: ADM) and Bunge Global (NYSE: BG), as well as packaged food manufacturers and restaurant chains, will benefit from lower agricultural commodity prices, which reduce their ingredient costs and boost profit margins. Livestock producers, including Tyson Foods (NYSE: TSN) and Pilgrim's Pride (NASDAQ: PPC), will also gain from reduced feed costs. However, direct agricultural producers and large-scale farming operations will experience lower revenue for their crops, potentially leading to shrinking profit margins, despite some relief from lower fertilizer prices. Fertilizer producers, such as Nutrien (TSX: NTR / NYSE: NTR) and CF Industries (NYSE: CF), are an exception to the broader decline, as their prices are expected to surge in 2025 before easing slightly in 2026. While this surge initially benefits them, the subsequent easing and potential farmer resistance to high input costs could create future challenges.
In the metals and mining sector, the outlook is mixed. Companies focused on base metals like copper and iron ore will likely face declining demand and prices. However, precious metals miners, particularly those in gold and silver, are experiencing a boom. Companies like Newmont (NYSE: NEM), Barrick Gold (NYSE: GOLD), and Agnico Eagle Mines (NYSE: AEM) are seeing surging prices, leading to increased revenues. However, if gold prices stabilize as forecast for 2026, or if operational costs remain high, their margins could still face pressure. Companies with higher "all-in sustaining costs" (AISC) per ounce will experience significant margin compression if metal prices decline.
Wider Significance: A Rebalancing Act for the Global Economy
The World Bank's forecast for declining commodity prices by 2026 extends far beyond immediate market fluctuations, signaling a profound rebalancing act for the global economy. This trend fits into broader industry shifts, creating ripple effects across nations and demanding strategic policy responses.
One of the most significant broader trends is the green energy transition, which is fundamentally reshaping demand for various commodities. While fossil fuel demand is slowing due to factors like the rapid adoption of electric vehicles, particularly in China where EVs constitute over 40% of new car sales, demand for critical minerals essential for batteries and renewable energy infrastructure is set to grow. This bifurcation creates a complex landscape where traditional energy giants face headwinds, while companies involved in mining and processing metals like lithium, copper, and nickel may see long-term tailwinds. The slowdown in global economic growth, especially in Asia and Europe, is also a crucial factor, leading to reduced manufacturing activity and international trade. An oversupply in many commodity-producing countries, which ramped up production during periods of high prices, further exacerbates the downward pressure.
The ripple effects are particularly pronounced for commodity-exporting nations, which comprise two-thirds of developing countries. These nations face significant risks of reduced government revenues, budget deficits, and slower economic growth, challenging their fiscal stability and development agendas. Conversely, commodity-importing nations stand to benefit from lower energy and food costs, which help ease inflationary pressures, reduce import bills, and improve current account balances. This can provide central banks in these countries with greater flexibility to consider loosening monetary policy, such as interest rate cuts, to stimulate economic growth. The financial markets are already witnessing a "bifurcation of winners and losers," prompting financial institutions to reassess their commodity exposure and inflation strategies.
From a regulatory and policy perspective, the World Bank's chief economist, Indermit Gill, advises governments to leverage this period of easing commodity prices to "get their fiscal house in order, make economies business-ready, and accelerate trade and investment." This implies a strong call for fiscal discipline, particularly in commodity-exporting nations, to manage volatile revenues and avoid overspending. Monetary policy in importing countries may find more room to maneuver, while commodity-dependent economies are urged to pursue economic diversification strategies to reduce their reliance on volatile commodity markets. The report also highlights that escalating trade barriers, especially against Chinese exports, could fragment global supply chains and reduce economic efficiency, impacting commodity markets.
Historically, commodity markets have undergone repeated cycles, often synchronized across different commodities. The current decline marks the end of a period of elevated inflation-adjusted prices that followed the global recovery from the COVID-19 pandemic and Russia's invasion of Ukraine. This echoes past periods of weak demand and supply disruptions that depressed commodity prices, such as during global recessions. The sustained surge in gold prices during times of economic uncertainty and geopolitical risk is a consistent historical pattern, reinforcing its role as a safe-haven asset. The lasting lesson from historical precedents is the vulnerability of low-income, commodity-dependent countries to price volatility, underscoring the critical need for fiscal prudence and economic diversification.
What Comes Next: Navigating the New Commodity Landscape
The World Bank's forecast sets the stage for a period of significant adaptation and strategic shifts in the short and long term. As of late 2025, the immediate possibilities revolve around managing disinflationary pressures and their impact on monetary policy.
In the short term, declining commodity prices are expected to continue easing global inflation, potentially giving central banks, including the Federal Reserve and the European Central Bank, more room to consider interest rate cuts in the coming months. This could stimulate economic growth by reducing borrowing costs for businesses and consumers. Industries that are major commodity consumers, such as airlines, manufacturing, and food processing, will likely see improved profit margins dueating to reduced input costs. Consumers, in turn, will benefit from lower energy and food prices, boosting their purchasing power and potentially stimulating demand in consumer discretionary sectors. However, commodity-exporting nations may experience currency weakening due to declining export revenues, posing challenges for their economies.
The long-term outlook points to more profound structural changes. The green energy transition and increasing industrial efficiency are expected to lead to a sustained decline in demand for fossil fuels, necessitating a re-evaluation of investment in traditional energy infrastructure. This structural shift implies a lasting rebalancing of prices, with fossil energy sources under pressure while critical metals for batteries and clean energy infrastructure see growing demand. For developing economies, this period will be crucial for undertaking fiscal reforms and diversifying their economies away from commodity dependence to ensure sustainable growth. There will also be a renewed, long-term focus on strengthening supply chain resilience and energy independence globally, driven by the volatility experienced in recent years.
Strategic pivots and adaptations will be essential for both governments and businesses. Governments, especially in commodity-exporting developing economies, must prioritize fiscal discipline, foster economic diversification, accelerate trade and investment, and strategically phase out costly fuel subsidies. Businesses will need robust cost management strategies, dynamic pricing models, and enhanced supply chain resilience through diversified sourcing and collaborative partnerships. Financial hedging strategies will become more critical to mitigate adverse price movements, and innovation in energy efficiency and sustainable practices will be key to adapting to evolving demand patterns. Manufacturers, particularly in the battery and EV sectors, will need to carefully manage upstream inventories and long-term contracts.
Market opportunities may emerge in consumer-oriented sectors that benefit from lower borrowing costs and increased consumer spending, such as technology and certain segments of real estate. Companies offering innovative solutions for energy efficiency, sustainable agriculture, and renewable energy infrastructure, especially those involved in critical and battery metals, are poised for increased investment and demand. Conversely, challenges will persist for commodity-exporting nations facing slower growth and fiscal strain. Industries with significant exposure to volatile energy costs may continue to face hurdles, and in a disinflationary environment, industries facing intense competition may find their pricing power diminishing.
Potential scenarios range from an optimistic "soft landing," where central banks successfully manage disinflation without stifling growth, leading to lower interest rates and stable commodity markets, to a challenging "prolonged downturn" exacerbated by deeper global economic slowdowns or escalating trade tensions. Commodity-specific shocks from geopolitical conflicts or extreme weather events could still cause price spikes, particularly for energy and agricultural products. Furthermore, the rapid expansion of Artificial Intelligence (AI) and its electricity demand could raise prices for energy and base metals essential for AI infrastructure, adding another layer of complexity to the forecast.
A New Era of Commodity Markets: Investor Vigilance is Key
The World Bank's forecast for commodity prices to decline to a six-year low by 2026 marks a significant juncture, signaling a new era for global markets. This period is characterized by a powerful disinflationary trend, offering a much-needed respite from recent high inflation, yet simultaneously posing profound economic challenges for commodity-exporting nations. The overarching significance lies in the interplay of weak global demand, oversupply, and the accelerating structural shifts driven by the green energy transition.
Moving forward, the market is in a crucial rebalancing phase. While the overall decline in commodity prices is stabilizing the global economy by easing inflation, it also reflects weak global demand and oversupply in several key sectors. The divergence between falling fossil fuel prices and rising demand for critical minerals for the energy transition highlights a fundamental, lasting shift in commodity market dynamics. Financial markets will remain acutely focused on central bank responses to this disinflationary environment, with potential interest rate adjustments on the horizon. Equity markets may see a rotation towards sectors benefiting from lower input costs and increased consumer spending, while commodity-linked equities will require careful, selective investment.
The lasting impact of this period will likely be a renewed global focus on supply chain resilience, as businesses and governments prioritize diversified sourcing to mitigate future shocks. The drive for energy independence, particularly away from volatile fossil fuels, will accelerate. Furthermore, fiscal prudence and economic diversification will become paramount for commodity-dependent nations to withstand future price cycles. This period will also underscore the limits of monetary policy in addressing all forms of inflation, particularly those rooted in supply-side issues or structural shifts.
For investors, the coming months (as of October 29, 2025) demand vigilance and strategic positioning.
- Central Bank Actions: Closely monitor forward guidance from major central banks (Federal Reserve, ECB) regarding interest rate trajectories. Sustained disinflation and subsequent rate cuts could significantly influence equity and bond markets.
- Geopolitical Developments: Any escalation of conflicts or shifts in trade policies could quickly introduce supply disruptions, especially for energy and food, leading to unexpected price spikes in specific commodities.
- Oil and Natural Gas Dynamics: Pay attention to oil supply-demand balances, OPEC+ production decisions, and the ongoing impact of electric vehicle adoption. For natural gas, monitor US export capacity and European winter demand, as regional prices can diverge.
- Inflation Data: Continue to monitor global and domestic inflation reports, particularly core inflation figures, to gauge the extent to which commodity price declines are translating into broader price stability.
- Sector-Specific Performance: Consider investments in sectors that benefit from lower input costs (e.g., airlines, transportation, manufacturing) and increased consumer purchasing power (e.g., consumer discretionary, technology). Also, look for companies providing solutions for energy efficiency and those involved in the supply chain of critical minerals (lithium, copper, nickel) for green technologies. For gold, avoid panic selling during pullbacks, and consider staggered investments for new entries, focusing on quality mining companies with strong financials.
- Diversification and Risk Management: Maintain a diversified portfolio and adopt a long-term perspective. Given potential volatility, consider hedging strategies where appropriate, especially for businesses with significant commodity exposure.
- Emerging Market Focus: For exposure to emerging markets, favor countries that are net commodity importers, as they stand to benefit from lower input costs, rather than commodity exporters who face revenue pressures.
By carefully observing these factors, investors can better navigate the evolving landscape shaped by declining commodity prices and position their portfolios for the short and long-term implications of this new commodity era.
This content is intended for informational purposes only and is not financial advice
