Global commodity markets are headed toward their sharpest downturn in six years, with the World Bank warning that prices will fall by another 7% in both 2025 and 2026. The decline, driven by weak global growth, an expanding oil surplus, and persistent policy uncertainty, signals both relief for inflation and risk for exporters dependent on primary commodities.
Energy Prices Slide, Inflation Cools — for Now
Energy markets, once the cornerstone of inflationary pressure, are now stabilizing the global economy. According to the World Bank’s Commodity Markets Outlook, energy prices are expected to plunge by 12% in 2025 and another 10% in 2026.
“Commodity markets are helping to stabilize the global economy,” said
Indermit Gill, the World Bank Group’s Chief Economist and Senior Vice President for Development Economics. “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.”
The global oil glut—now 65% higher than the previous peak in 2020—is expected to deepen next year as
OPEC+ output rises and demand growth slows.
Food Prices Ease, Fertilizer Costs Bite
Food commodities are also softening, offering modest relief to consumers. Food prices are projected to fall by 6.1% in 2025 and 0.3% in 2026, thanks to strong cereal harvests and cooling global demand. Yet this reprieve comes with a warning: fertilizer prices are set to surge 21% in 2025, before easing slightly the following year. Rising input costs and export restrictions threaten to squeeze farmers’ margins and dampen future crop yields.
Soybeans, coffee, and cocoa—all staples of developing-country exports—will face downward price corrections as supply conditions improve. But analysts warn that extreme weather linked to a stronger La Niña could still disrupt agricultural output and reignite price pressures.
Safe Havens Shine as Precious Metals Break Records
Amid uncertainty, investors are turning to
gold and silver. Gold prices are projected to rise by 42% in 2025 and an additional 5% in 2026, pushing the metal to nearly double its 2015-2019 average. Silver follows closely, with gains of 34% in 2025 and 8% in 2026, driven by investor demand and industrial applications tied to the
clean-energy transition.
Shifting the Development Equation
For developing economies, the downturn in oil and food prices presents a rare fiscal window.
“Lower oil prices provide a timely opportunity for developing economies to advance fiscal reforms that promote growth and job creation,” said
Ayhan Kose, the World Bank’s Deputy Chief Economist and Director of the Prospects Group. He urged countries to phase out costly
fuel subsidies, redirecting funds toward infrastructure, human capital, and innovation.
The World Bank report’s special focus section revisits the history of international commodity agreements—from sugar to coffee to oil—revealing that few efforts to stabilize prices through quotas or trade restrictions delivered lasting results. Even OPEC, the most enduring commodity cartel, has struggled to maintain market control in high-price cycles.
What Lies Ahead
The World Bank cautions that the balance of risks leans heavily toward volatility.
- A deeper global slowdown could drag commodity prices lower than forecast.
- Expanded oil output from OPEC+ could intensify the supply glut.
- Rising electric-vehicle adoption may permanently cap oil demand.
- Conversely, geopolitical conflicts or new sanctions could lift oil prices abruptly, while AI-driven electricity demand could push base-metal prices higher.
In a world where energy transitions, geopolitical realignments, and technological revolutions intersect, commodity markets are once again defining the global development landscape—this time, through turbulence rather than boom.
Comments
Post a Comment