Commodity Price Watch: May 2026

The war in the Middle East is well into its third month, and the Strait of Hormuz remains effectively closed despite a tenuous ceasefire. The current expectation is that the strait will be open from June onward, but uncertainty is high. If the strait remains effectively closed, then the possibility of shortages grows more worrisome. Not only oil and gas, but helium (needed for microprocessor manufacturing), sulfur (needed for fertilizer, copper refining, nickel refining, and more), and aluminum eventually run out of inventory. These shortages are not the base scenario but do point out that risk is to the upside.

Even if the war ends tomorrow and the strait reopens fully, the supply chain and price impacts continue for months afterward. Ships are in the wrong place and need time to travel to destination ports and offload. Inventories are drawn down and must be replenished. Insurance for ships will be higher to cover fear of attack.

The major impacts from the Middle East war are on crude oil and refined products, natural gas, chemicals and plastics, and a few nonferrous metals. Copper, aluminum and nickel are strongly affected but steel is not except indirectly through energy costs. In building materials, plastics and asphalt are directly impacted but lumber is not. By region, Asia is most hit on the cost side but also faces the greatest eventual demand destruction. Any spending on energy and food cannot be spent on appliances or restaurants or even infrastructure investment.

The Materials Price Index (MPI) by S&P Global Market Intelligence will surge in the second quarter to more than 25% higher than the prewar forecast. Prices will stay high through the third quarter then begin to retreat but even by the end of 2028 are not back to our prewar expectations. As measured by the MPI, industrial materials prices increased 10.7% in the first quarter of 2026 and are forecast for a 19.2% increase in the second quarter. The process to pass through higher manufacturing costs will be limited by weaker demand.

The chemicals and resins forecast was once again revised noticeably higher across the board with our latest forecast. We now expect prices to peak in the third quarter of 2026 instead of the second quarter, because of the continued effective closure of the Strait of Hormuz. The downward correction will be more gradual, because of the significant disruption across energy and chemical supply chains.

Pricing conditions for the sector will remain highly volatile and, despite some easing in spot markets in the first two weeks of May, upside risk remains while the war in the Middle East continues. Risk of physical shortages is considered low, with price the main pain point, rather than availability.

Steel prices will peak in the second quarter in most of the world with costs pulling back in the third quarter and demand softness relieving upward pressure. In the US, a slower-than-expected shift to cost-competitive imports from Asia will push the price peak out to the third quarter in our current forecast. In the second half of the year, mainland Chinese prices will retreat from the recent climb as output exceeds consumption while global trade in steel is underwhelming. Supply disruption is unlikely but may occur if war-related shipping issues arise, or if temporary energy shortages curtail production.

Demand will be flat to negative in Europe, the United States and mainland China. Global demand was already forecast to decline slightly, and the war will undercut even more. East Asia and India do grow, but they are dependent on Middle East oil and gas supply so the longer the war, the weaker the general demand outlook in the region.

There remains a low-odds/high-impact risk of deep production cuts in mainland China in 2026. Market speculation over such cuts caused the price spike in July 2025 that took several months to unwind. We will monitor developments closely but will not revise our weak outlook until we see strong evidence that it is policy rather than rumor.

Aluminum prices continue to be elevated by tight supply. Higher costs, reduced availability and the fear of further capacity reduction will continue to support prices and expand regional premiums until the Iran war is concluded, or at least better understood. Demand, though, is weakening because higher prices are feeding into higher inflation and consumer confidence is being depressed. This will partly offset the upward cost pressures.

Supply, not price, will be the prime concern for many aluminum buyers. With the US-Israel war with Iran now in its third month, and with limited potential for a lasting solution, the upward price pressure will not dissipate until well into the second half of 2026. An already tight market, because of smelter closures and industrial accidents, has been tightened further by the loss of gas supply and alumina flows to some Middle Eastern smelters and then by missile attacks against two of the largest in the region. With 6–12 months needed to bring a smelter back online, once spare parts are sourced, the attacks have brought near-term price strength and point to a slower price slide when the conflict is resolved.

Copper prices will track sideways, as supply concerns and strong speculation are balanced by weaker demand and strong production. With the market now showing a small surplus, worries about supply availability have diminished. This has pushed prices up, with Commodity Exchange (COMEX) prices hitting new highs, but they did not reach as high as expected. Beyond immediate market dynamics and the effects of the ongoing war in the Middle East, the continued strength of demand and the slow increase in mine capacity point to appreciating prices and a $12,000/metric ton (544 cents/lb) price floor going forward.

--With contributions from Keyla Goodno and Emiliano Pérez