Tashkent, Uzbekistan (UzDaily.com) —  The latest report from the World Bank, titled "Commodity Markets Outlook," forecasts that global commodity prices will reach a five-year low in 2025 due to an oversupply of oil.

This surplus could mitigate the price impacts of even larger conflicts in the Middle East. However, even in such scenarios, global commodity prices are expected to remain 30% higher than the average levels recorded in the five years prior to the COVID-19 pandemic.

According to forecasts, global oil supplies will exceed demand by 1.2 million barrels per day in 2025. Such an oversupply has only been recorded twice before: in 2020, when the pandemic led to widespread business shutdowns, and in 1998 amid falling oil prices.

The current situation is partially attributed to stagnant demand in China since 2023, resulting from slowed industrial growth and increased sales of electric vehicles and LNG trucks. Additionally, oil production in non-OPEC+ countries is expected to rise, while OPEC+ members hold reserve capacities of 7 million barrels per day—almost double the pre-pandemic level in 2019.

From 2024 to 2026, a decrease of approximately 10% in global commodity prices is anticipated. Food prices may drop by 9% this year and another 4% in 2025 before stabilizing, although they will remain 25% above the average levels of 2015–2019. Energy prices are projected to decrease by 6% in 2025 and 2% in 2026, simplifying central banks’ efforts to control inflation. However, escalating conflicts could disrupt energy supplies and cause food and energy prices to rise, complicating inflation control efforts.

World Bank Chief Economist Indermit Gill noted, “The decline in commodity prices and improved supply conditions can serve as a buffer against geopolitical shocks. However, this is unlikely to ease the situation with high food prices in developing countries, where food inflation is twice that of developed economies. Over 725 million people still face food shortages due to high prices, conflicts, extreme weather, and other shocks.”

The conflict in the Middle East has resulted in significant volatility in oil prices over the past year. If the conflict does not escalate, the average annual price of Brent oil in 2025 is expected to reach US$73 per barrel, marking a four-year low. For 2024, this figure is around US$80.

The report also assesses potential developments in the event of escalating conflict, which could reduce global oil supplies by 2% or 2 million barrels per day—similar to shocks caused by the civil war in Libya in 2011 and the war in Iraq in 2003. In such a scenario, the price of Brent oil could temporarily spike to US$92 per barrel. However, oil-producing countries unaffected by the conflict could quickly ramp up production, softening the price surge. Consequently, the average oil price in 2025 could reach US$84 per barrel, 15% higher than the baseline forecast, but only 5% above the average price for 2024.

World Bank Deputy Chief Economist Ayhan Kose remarked, “The global economy is currently in a better position than before and can withstand significant oil shocks. This presents unique opportunities for developing countries. Firstly, the decline in commodity prices could support monetary policy measures aimed at achieving inflation targets. Secondly, there is an opportunity for a gradual phase-out of costly fossil fuel subsidies.”

The forecast for gold, traditionally seen as a "safe haven" for investors, indicates that its price will hit a record high this year, exceeding last year’s levels by 21%. Gold occupies a unique position among assets, with its value rising amid geopolitical and economic uncertainty. In the next two years, gold prices are expected to remain 80% above the average values recorded before the pandemic, with only slight declines anticipated. Prices for industrial metals are expected to stabilize in 2025–2026, as low activity in China’s real estate sector is offset by supply challenges and rising demand for metals used in the energy transition. However, a surge in economic growth in China could lead to volatility in metal markets.

In a thematic section of the report, the World Bank examines the reasons for the synchronous movement of commodity prices before and after the pandemic. Experts note that from 2020 to 2023, global commodity prices rose in unison due to the pandemic’s global repercussions and major commodity shocks, such as Russia’s invasion of Ukraine. Synchronous price increases typically exacerbate inflation and slow economic growth. However, recently (over the past year), commodity prices have shown less synchronized movement.