Following a sharp surge in commodity prices from 2020 to 2022—driven by the Covid-19 pandemic and the Russia–Ukraine war—prices corrected lower throughout 2023 and 2024. We project aggregate commodity prices to decline by 1.3% in 2025 and a further 1.4% in 2026.
However, we expect stabilisation by mid-2026 and recovery in the second half of the year as economic activity strengthens and the drag from tariffs and uncertainty fades, proving the starting point for a commodity price upcycle.
Commodity price performance has been mixed in 2025, with roughly half the basket showing gains and the other half declining.
Natural gas and precious metals have led the gains, while soft commodities and oil are the main losers. Looking ahead, we anticipate a broader contraction in 2026, but with US natural gas and precious metals continuing to outperform.
Meanwhile, oil and agricultural commodities are likely to face oversupply pressures, and industrial metals will remain under pressure due to soft industrial demand.
Slowing global momentum weighing on our price forecasts
Although global activity was resilient in the first half of 2025, our business cycle indicator suggests momentum is slowing.
Much of the earlier strength reflected front-loaded demand ahead of tariff implementation, which is now fading. We forecast global GDP growth to ease from 2.8% in 2025 to 2.6% in 2026.
While we do not anticipate a recession in the US or globally, we expect overall commodity market performance to remain subdued heading into next year.
Global trade is expected to remain soft as higher US tariffs take effect, with ongoing uncertainty further dampening business investment. Investment cycles tend to disproportionately impact commodity markets, as investment-heavy sectors like construction and manufacturing are major consumers of raw materials (Chart 2).
Historically, base metals exhibit the highest price elasticity of demand, followed by energy, while food staples tend to be less sensitive to the business cycle. This dynamic means industrial commodities are more vulnerable during economic slowdowns.
The full impact of tariffs on global industrial output has yet to materialise, as such shocks typically take six to nine months to fully play out.
In the near term, weaker investment is likely to weigh on industrial production and construction, reducing demand for fuels, metals, and materials (Chart 3).
Lower infrastructure and factory spending will also curb energy use and with fewer projects underway, metal demand is expected to weaken.
Since mines and smelters are typically slow to adjust output, stockpiles may temporarily rise, putting additional downward pressure on prices. Falling interest rates will also reduce the cost of carry and storage, which could also contribute to building inventories.
