World Bank forecasts 23% rise in commodity prices

Global commodity prices are projected to rise by 23 per cent in 2026 as the conflict in the Middle East disrupts oil supplies, while shipping disruptions and weather risks threaten food production, the World Bank has said.

In its latest Commodity Markets Outlook, released on Wednesday, the World Bank said energy prices were expected to increase by 32 per cent this year, reversing three consecutive years of declines, before moderating in 2027.

“Food commodity prices are expected to rise about 10 per cent in 2026 and another 7 per cent in 2027, a cumulative increase of 18 per cent, as conflict disrupts grain shipments, El Niño threatens harvests, and high fuel and fertilizer prices increase agricultural costs. Overall commodity prices are forecast to rise 23 per cent this year before declining by 7 per cent in 2027,” the lender said in the report.

The bank warned that the outlook remained vulnerable to further disruptions to global supplies, particularly if the conflict in the Middle East escalated or damage to Russia’s oil infrastructure continued.

It cautioned that its projections assumed no major escalation of conflicts affecting commodity supplies. Worsening these risks could push energy prices above the baseline forecast and intensify pressure on food markets.

The report highlighted the possibility of a food crisis if higher energy prices coincided with attacks on Black Sea grain shipments and a severe El Niño.

Under such an adverse scenario, Brent crude could average $`105 per barrel in 2027, while food commodity prices could be 12 per cent above the baseline forecast, exceeding their 2022 levels.

“Commodity markets are being hit by several major shocks at once,” the World Bank’s Deputy Chief Economist and Director of the Prospects Group, Ayhan Kose, said.

“Higher energy costs and trade disruptions are driving up prices across a broad range of commodities, threatening to worsen inflation, food insecurity, and economic growth. The priority must be to protect the poorest people and support low-income countries already struggling with heavy debt burdens.”

To help countries manage the impact of higher prices, the World Bank Group said it had made between $50bn and $60bn available through existing financing instruments, including `$25bn in pre-arranged financing.

The funding could support social safety nets for vulnerable populations, strengthen government fiscal capacity, and provide working capital and liquidity support for businesses and farms.

The institution also said it had made progress in accelerating and simplifying the mobilisation of private capital alongside its financing and advisory services. The measures were intended to support investment in young people in developing countries, particularly by improving conditions for job creation.

The conflict is also reshaping global energy production and consumption. The world oil supply is projected to fall by 5.2 per cent in 2026, marking the largest decline in more than four decades outside the 2020 global recession.

Oil consumption is expected to decline by 2.5 per cent, the third-largest annual contraction on record after 2020 and 1980.

Higher prices amid supply shortages are curbing demand, while electrification is also reducing oil consumption, particularly in China. However, production is expected to remain below consumption, forcing further withdrawals from oil inventories and leaving markets more vulnerable to additional supply disruptions.

Beyond energy, fertiliser prices are projected to rise by 14 per cent in 2026 following an early-year surge in urea prices that has since eased. Prices are expected to return to 2025 levels in 2027.

Metal prices are forecast to rise by 25 per cent in 2026, reaching a new high as aluminum, copper and tin prices hit records. The World Bank attributed the increases to strong demand from investment in renewable energy, electric vehicles and data centres, alongside supply disruptions during the year. Metal prices are expected to decline by three per cent in 2027.

Precious metal prices are projected to increase by 40 per cent in 2026 as demand for safe-haven assets remains elevated amid geopolitical and policy uncertainty. Although prices are expected to moderate in 2027, they are forecast to remain more than three times their 2015–2019 average.

A special focus in the report examined the links between commodity markets, including how price movements in one commodity can be influenced by shocks affecting others.

The analysis found that connections between commodity price volatility become stronger during periods of economic or market stress, including since the start of the current conflict in the Middle East.

Industrial metals transmit the most volatility to other commodity groups on average, although the influence of oil prices increased markedly after the conflict began, according to the report.