Global commodity prices are projected to fall to their lowest level in six years by 2026, the World Bank has warned, marking the fourth consecutive year of decline amid a growing oil surplus, slower economic growth, and continued policy uncertainty worldwide.
The Bank’s latest Commodity Markets Outlook released this week revealed that global commodity prices could fall by an additional seven per cent in both 2025 and 2026, driven mainly by weakening oil demand and improved agricultural supply conditions.
Energy glut deepens as oil prices slide
According to the report, global oil markets are set to remain under pressure as an oversupply continues to expand.
The World Bank estimates that the oil glut in 2026 will exceed its 2020 peak by 65 per cent.
This trend is largely attributed to reduced demand from China, growing adoption of electric and hybrid vehicles, and slow industrial recovery in advanced economies.
It projected that Brent crude oil prices would decline from an average of $68 per barrel in 2025 to about $60 in 2026 — the lowest in five years.
Energy prices overall are forecast to drop by 12 per cent in 2025 and a further 10 per cent in 2026, helping ease inflationary pressures in several economies.
Chief Economist and Senior Vice President for Development Economics at the World Bank, Indermit Gill, said the declining global commodity prices are stabilising the international economy and easing the cost of living for millions.
“Falling energy prices have contributed significantly to the drop in global inflation.
However, this relief may not last long. Governments should seize this window to strengthen fiscal buffers, attract investment, and make their economies more resilient,” Gill cautioned.
Agricultural and food prices showing mixed trends
The report noted that food prices are on a downward trajectory, though not as steep as energy commodities. Overall, agricultural prices are forecast to decline by about 6.1 per cent in 2025 and 0.3 per cent in 2026.
For instance, global soybean prices are expected to stabilise after sharp drops caused by record global output and trade disputes between major producers.
Similarly, wheat and rice prices have eased, improving food affordability in several developing nations.
However, fertiliser prices tell a different story. The Bank projected a 21 per cent surge in 2025 due to higher input costs and export restrictions, followed by a moderate five per cent decline in 2026.
This volatility could squeeze farmers’ margins and affect agricultural productivity in the medium term.
Deputy Chief Economist and Director of the Prospects Group, Ayhan Kose, said developing nations could take advantage of lower oil prices to push fiscal reforms.
“Lower energy prices provide an opening for governments to phase out costly fuel subsidies and redirect funds toward productive investments like infrastructure and education,” Kose explained.
“Such moves not only rebuild fiscal stability but also support long-term job creation.
Precious metals outperform amid global uncertainty
While most commodities are declining, precious metals remain an exception.
Gold and silver are projected to maintain strong performance, buoyed by demand from investors and central banks seeking safe-haven assets amid economic uncertainty.
Gold prices are forecast to rise by 42 per cent in 2025 and an additional five per cent in 2026, almost doubling their pre-pandemic average.
Silver prices are expected to grow by 34 per cent in 2025 and another eight per cent in 2026.
According to the Bank, this reflects ongoing global uncertainty, with investors turning to metals to hedge against inflation, currency fluctuations, and geopolitical instability.
Factors that could shape future global commodity prices
The World Bank outlined several risks that could either accelerate or reverse the current price trends.
If global growth continues to weaken and OPEC+ maintains high production levels, global commodity prices could fall further.
Additionally, the rapid rise in electric vehicle sales could suppress oil demand more quickly than anticipated.
By contrast, escalating geopolitical tensions, extreme weather linked to La Niña, or disruptions to major trade routes could drive prices back up.
The Bank also highlighted the growing impact of artificial intelligence on energy and metal demand.
The global expansion of data centres and AI infrastructure could increase electricity consumption and boost the need for base metals like aluminium and copper.
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Lessons from past commodity agreements
The report’s special focus examined historical international commodity agreements, including production quotas and inventory controls. While such mechanisms temporarily stabilised prices, few achieved lasting balance.
The Organisation of the Petroleum Exporting Countries (OPEC) remains the most enduring example of such coordination, yet the Bank noted that its market influence often weakens when prices rise, as new competitors enter the field.
“The past shows us that market forces eventually rebalance supply and demand. Sustainable solutions lie not in artificial price controls but in diversifying economies and investing in innovation,” the report concluded.
Outlook for developing economies
As the world adjusts to falling global commodity prices, the World Bank urged developing nations to take advantage of cheaper imports and lower inflation to rebuild fiscal buffers, reform trade policies, and invest in human capital.
It emphasised that structural reforms and diversification would be key to weathering future shocks, particularly as technology and energy transitions reshape global demand patterns.
“Commodity markets may be cooling, but they offer a crucial opportunity for nations to strengthen economic resilience,” Gill added.
With the global energy landscape shifting and inflation stabilising, 2026 may mark a turning point in how economies balance growth, sustainability, and fiscal discipline.
