The world has been on a commodity price roller-coaster ride since the end of 2019, when it became clear COVID-19 would require countries to shut down their economies and borders to contain the virus. “Since [the] pandemic, sharp swings in commodity prices have driven volatility to record highs,” the World Bank said in an April report.

Fueling this uncertainty are ongoing wars in Ukraine since 2022 and the Gaza Strip since 2023 and U.S. President Donald Trump’s unpredictable policies. Those events “raise the question of whether these recent movements represent relevant changes in commodity price cycles or remain broadly within historical norms,” the World Bank said. 

This year and the next could be the start of a reprieve for net commodity importers, such as Egypt. “Between 2020 and 2024, commodity price swings were frequent and sharp, with knock-on consequences for economic activity and inflation,” the report said. “In the next two years, commodity prices are expected to put downward pressure on inflation.” 

Nevertheless, the World Bank stressed it bases its predictions on current volatilities and uncertainties, and that unforeseen events could upend those forecasts. “The interplay of possible supply disruptions, set against the backdrop of geopolitical risks, fragmentation, adverse weather conditions and sustained demand for critical minerals, could heighten market vulnerabilities, leading to frequent and intense commodity cycles.”  

New era?

According to the bank, from 1970 to 2024, commodity “price slumps have lasted significantly longer than booms.” Meanwhile, the “amplitude of [price] upswings [has been equal] to the downswings.”

The report noted that metal commodities follow that pattern more closely than energy and agriculture. It “reflects their common sensitivity to macroeconomic conditions,” the World Bank said. Agricultural commodities are the least likely to follow that trend as they are “driven by localized supply shocks,” the report said. 

Until 2001, the time between price upswings and downswings increased, while the price amplitude decreased, indicating increasing stability. The following years saw a reversal — The time between swings was getting shorter and amplitudes were rising. That backtrack “reflects a mix of global macroeconomic shocks — including rapid [emerging market] growth and international integration, followed by the [2008] global financial crisis — and more commodity-specific shocks,” the report said.

That trend has been amplified since 2020. “Record commodity volatility reflected the impact of overlapping global and commodity-specific shocks,” including the pandemic, unpredictable weather, and geopolitical fallouts. Other factors include “the energy transition, climate [related] supply risks, and rising economic fragmentation.” 

Global trade

Increasing trade barriers and tensions are the most significant risks to commodity prices in 2025, as geopolitical fallout spreads worldwide among both long-time adversaries and even trusted allies. Between “2022 [and] 2024, the number of new restrictions implemented on trade in energy, metals and food commodities was 10 times the corresponding number in the three years before COVID-19,” the World Bank said.

Those additional trade barriers led to a “decline in commodity consumption that follows from slowing economic growth [from less cross-border trade], especially affecting industrial commodities,” the report noted. 

In 2025 and 2026, two additional factors will largely influence global commodity prices: Which countries are trading with each other and whether the imported commodity is subject to different trade barriers than the rest.

With those caveats, “the precise magnitude of the hit … from recent policy shifts and the … aggregate effects on commodity markets remain highly uncertain,” the World Bank said. Factors fueling that uncertainty include “the length of time that recently enacted trade measures stay in place, whether trading partners engage in further retaliation or escalatory actions, and the duration of the current spell of acute policy uncertainty.”

Another significant factor influencing commodity price fluctuations is whether tariffed items can be supplied locally or from nations with lower trade barriers. “In cases where commodity trade is diversified and transport from alternative destinations is not prohibitively expensive, commodity trade flows are likely to be heavily rerouted, with minimal change to global supply and demand,” the World Bank forecasts. That means markets would have to contend with declining efficiency, resulting in higher prices.

The World Bank report expects commodity prices to drop 12% this year and 6% in 2026. “If realized, these declines would end a period of elevated inflation-adjusted commodity prices in the aftermath of COVID-19 … and Russia’s invasion of Ukraine,” the report said.  

Energy prices

Global oil price fluctuations have long reflected sentiment toward a state’s economic policies as much as demand and supply mismatches. Since Trump’s second term started Jan. 20, oil prices have declined from $76.50 per barrel to $61.53 at press time. 

On Apr. 1, oil prices took a significant hit when the U.S. government imposed a minimum 10% tariff on every nation. And despite pausing them weeks later, oil prices remained depressed compared to pre-April’s $71.30 per barrel. 

In addition to Trump’s tariffs, the World Bank cited the decision by OPEC+, a cartel of the world’s largest 23 oil producers, one day after Trump’s blanket tariffs, to “increase oil supply by about 0.4 million barrels daily, three times the previously announced increase.” That means the “global oil supply [increase in 2025 is] almost double the rise seen in 2024,” the World Bank report said.

On the ground, the bank expects oil prices to increase slightly, ending the year at $64 per barrel but dropping to $60 by the end of 2026. 

However, that forecast could change significantly. Upside risk would come from “additional sanctions on oil from … Iran, [which] could tip the oil market into deficit,” said the report. 

Meanwhile, more disruptions in the Middle East, Ukraine and Russia, and trade tensions could raise oil prices until 2026. 

On the flip side, “a deeper slowdown in global economic growth” could ultimately drop oil prices below forecasts in the coming two years, the report said. 

Natural gas prices followed oil’s lead in the wake of the U.S. tariffs announcement in April, as prices had decreased 19.7% at press time. For the rest of this year and the next, the World Bank forecasts prices will “rise sharply in 2025 and remain relatively steady in 2026.” 

U.S.-sourced natural gas will “surge by 51% year on year” in 2025 and taper off in 2026, increasing “a modest 3%.” Further amplifying this year’s predicted price jump is Trump’s increasingly fossil-fuel-friendly policies and adversarial stance toward sustainable and renewable energy projects.

European gas prices will rise 6% in 2025, followed by a 9% drop in 2026, as the continent continues its decarbonization efforts and due to “lower demand for [natural gas] from East Asia,” the report said.

Globally, “increases in production are expected to outstrip the rise in demand in 2025 [with the excess stored for the following year] but slip back just behind demand in 2026,” the World Bank said.  

The upside price risks for natural gas until 2026 will mainly be low storage levels and increased competition, the World Bank report said. It also noted that demand for natural gas would increase during extreme weather to replace renewable energy sources, whose outputs decline during harsh climate conditions.

The downside risk will be lower demand due to “weaker economic growth” and higher supply from “surging natural gas production.” 

Agriculture

According to the World Bank, “The agriculture price index [which combines food, beverage, and agriculture raw material commodities] is forecast to be broadly unchanged in 2025.” 

That stability will come from “declines in food and raw material prices by 7% and 2%, respectively … offsetting a 20% increase in beverage prices.” For 2026, the report forecasted agricultural prices will decline 3% as beverages see lower price increases.

Grain prices are expected to fall 11%, oils and meals 7%, and other foods 5% by the end of 2025. “In 2026, all sub-components of the food index are expected to remain broadly stable.”

For beverage commodities, 2026 should see their prices drop 11% compared to 2025’s 20% increase as “supply conditions are expected to improve in … September 2025 with global output set to increase,” the report said.

Meanwhile, the report said prices of agricultural raw materials like cotton and natural rubber should “stabilize in 2026” after their modest increase this year.

The World Bank put a caveat on those forecasts, saying prices would drop further if there is a “sharp slowdown in economic growth, [which is] in line with the emerging consensus [from] rising trade tensions and elevated uncertainty.” It also noted agricultural commodity prices could increase if crops are damaged by heat waves, which have “become more frequent, intense and prolonged.” 

Another critical factor will be whether demand for agricultural commodities decreases if they become too expensive and how easily impacted governments can find alternative trade partners. Answering those questions depends on “the country initiating the policy, the scope of adjustment, and the size of the imports relative to domestic production,” the report said.

Ultimately, the World Bank noted that agricultural commodity trends should not noticeably complicate food insecurity over the next two years, explaining that changes in trade barriers could easily offset price changes.   

Metal prices

Metals and mineral commodity prices join agricultural and energy commodities, dropping 10% year on year in 2025 and 3% in 2026, the report said. It cited “a sharper-than-expected slowdown in global economic growth and shifts in energy transition policies [that] could weigh on demand for base metals [such as aluminum, copper, zinc and iron ore], pushing prices below forecasts.”

However, “production disruptions or additional commodity-specific trade restrictions that curb metal supply could lift prices above projections,” the report warned. Currently, the United States imposes a 25% tariff on all steel and aluminum imports with no reciprocity from other nations on U.S. metal or mineral commodities. 

Precious metals, like gold, silver and platinum, follow a different path as they are not only used for manufacturing. They are “surging to record levels … largely driven by a continued rally in gold prices [as it is an investment hedge during uncertain times], which hit new record nominal highs in early April” after Trump imposed blanket double-digit tariffs,” the report said.

“With persistent [trade] uncertainty and elevated geopolitical tensions, gold prices are expected to reach an all-time high in 2025.” Meanwhile, mining activity and global economic growth prospects will impact all precious metal prices, particularly those used in manufacturing, such as silver and platinum. 

Investor sentiment

The World Bank report stressed that commodity prices are deeply interlinked. In addition to being individually impacted by global and national macroeconomic conditions, their “prices tend to move more closely together [in a way that] fundamentals alone [could not] justify,” the report said.

That is primarily the result of international and institutional investors using commodities as a hedge against volatile investment options, such as stocks, during times of uncertainty.

“The increased financialization has strengthened linkages across commodity prices,” the report said. Those links are established through “speculative investments and portfolio diversification strategies, [which] further amplify price co-movements.” 

This article first appeared in June’s print edition of Business Monthly.