Commodity Price Watch: July 2026

An uneasy ceasefire in the Middle East has allowed commodity prices to partially retreat from second-quarter 2026 peaks. According to S&P Global Market Intelligence analysis, prices will remain elevated above pre-conflict levels through 2028 due to lasting infrastructure damage and significant geopolitical risk. The outlook is vulnerable to the fragile ceasefire and the potential for renewed disruption in the Strait of Hormuz.

The July 2026 forecast reflects a critical juncture where a fragile US-Iran memorandum of understanding (MOU) has eased immediate supply fears, particularly for oil, and allowed trade to resume through the Strait of Hormuz. This has caused a downward correction in prices, but the situation remains volatile. Any re-escalation of the conflict poses a significant upside risk to prices for oil, chemicals, and other key industrial materials, making the stability of the ceasefire the central factor in the near-term forecast.

Easing trade disruption lowers prices, but risks remain significant

The price outlook for industrial materials was revised lower in this month’s forecast, with prices overall peaking in the second quarter but remaining above 2025 levels into 2027 and 2028.

An uneasy ceasefire in the Middle East had allowed commodity prices to relapse partially from second-quarter peaks, but recent resumption of hostilities and near-closure of the Strait of Hormuz show the risk to the forecast.

Damage already done to aluminum smelters and petroleum and chemical refineries will take months to repair, and if replacement equipment becomes scarce then the timeline is in years. Even as prices ease from their peak, they will be higher than the prewar forecast. The upside is partially offset by damage to business and consumer confidence and thus demand, but that will be small comfort for most companies. 

For this forecast, we assumed that there is an end to hostilities that holds despite occasional flare-ups. Ship traffic in the Strait of Hormuz will resume in fits and starts. A combination of a downturn in energy costs and softening of demand leads prices to decline over the second half of the year, but even by 2028 most prices are higher than at the end of 2025.

The Materials Price Index (MPI) by S&P Global Market Intelligence has peaked and will retreat through 2028. The peak was 27% higher than at the end of 2025 and is revised downward compared with prior forecasts because of the reaction to the memorandum of understanding (MOU) in June and the opening of the Strait of Hormuz.

The outlook is vulnerable to the path of the war. From the fourth quarter of 2026 to the fourth quarter of 2027, prices will subside 5.3% yet still be 16% above fourth-quarter 2025 levels. Looking to 2028, the fourth quarter will decline yet remain above the fourth quarter of 2025 — as said, higher for longer.

If the ceasefire does not hold and the strait effectively recloses for weeks or months rather than days at a time in the second half of the year, then the possibility of shortages grows more worrisome. Oil and gas are the most obvious, but helium (needed for microprocessor manufacturing), sulfur (needed for fertilizer, copper refining, nickel refining and more), and aluminum eventually run out of inventory or into steep demand destruction. These shortages are not the base scenario but do point out that price risk is to the upside.

In contrast, steel is largely unaffected except through higher transportation costs, although there is some loss of slab exports, and downward price pressure from weaker demand.

Highlights

• Aluminum Prices Correct Downward Improving trade flows through the Strait of Hormuz and a faster-than-anticipated recovery from the negative supply effects of the war in the Middle East have seen sharp downward corrections in aluminum prices. At the start of July, the London Metal Exchange (LME) spot price was already down from the June average and is forecast to slide further. Near-term supply conditions are less bleak. Gulf smelters are reporting quicker-than-expected resumptions to production, with some smelters already again operating at full capacity.
• Chemical Price Revisions and Lingering Risk Chemicals price forecasts have seen broad downward revisions from our previous forecast because of lower oil and feedstock price assumptions. However, upside price risk remains significant as the forecast is reliant on the continuation of the ceasefire in the Middle East and improving trade flows through the Strait of Hormuz.
• Global Steel Price Peaks Steel prices will peak in the second quarter in most of the world with flat to declining demand in major economies and a retreat in costs pushing prices lower over the second half of 2026, although price declines are now forecast to be slighter in Europe on tighter import quotas. In the US, a slower-than-expected shift to cost-competitive imports from Asia will push the price peak out to the third quarter.
• Crude Oil Price Volatility The MOU between the US and Iran in June led to a quicker-than-expected downward correction in crude prices. Prices are forecast to rise through the summer on summer demand, mainland China buying, and inventory restocking. However, this is contingent on a continued ceasefire and the Strait of Hormuz remaining open. If the conflict were to re-escalate, crude prices quickly enter the $90/b range — possibly higher.

Key assumptions

• Revised Oil Price Outlook The most significant change to the forecast this month is a lower outlook for oil prices. The announced MOU between the US and Iran contributed to sharp declines in crude oil prices and has led us to reassess the degree of tightness that we expect in oil markets over the next several quarters. We now expect the spot price of Brent crude to average $87/b in 2026 and even less in 2027, down from last month’s forecast.
• US Economic Growth and Monetary Policy The forecast for US real GDP growth for 2026 has been revised downward since June, while the forecast for growth in 2027 was lifted. Our estimate for second-quarter growth declined as both exports and inventory data came in well below our expectations through May. With inflation peaking at a lower rate because of a lower oil price forecast, we updated our monetary policy assumption.
• European Monetary Policy Tightening Monetary policy tightening is becoming more widespread. The 25-basis-point rate rise from the European Central Bank in June, the first among the G7 economies, matched our prediction. With inflationary concerns accompanied by a deteriorating growth outlook, we continue to expect only one additional quarter-point hike from the ECB this year. This broadly matches current futures market expectations.
• Global GDP and Inflation Assumptions Growth of real trade-weighted foreign GDP was estimated to be 2.6% in 2025 and will slow in 2026 before rebounding in 2027. Foreign consumer price inflation fell from 3.3% in 2024 to 2.4% in 2025 and will jump in 2026 before easing in 2027. Eurozone real GDP will increase in 2026 while mainland China’s growth decelerates.

How the Materials Price Index (MPI) Provides Clarity in Volatile Markets

Navigating this uncertainty in commodity prices requires a reliable benchmark. The Materials Price Index (MPI) by S&P Global Market Intelligence, referenced throughout this analysis, aggregates pricing data for key industrial materials, providing a clear, high-level view of market movements.

As shown in the forecast, the MPI helps users track the overall price retreat from Q2 peaks while quantifying the "higher for longer" environment, with prices projected to remain above late 2025 levels into 2028. For procurement, strategy, and risk professionals, the MPI offers an essential tool to benchmark costs, understand macroeconomic pressures, and ground their strategic decisions in data-driven insights.

Key Questions on the July 2026 Commodity Forecast

What is the primary driver of the revised commodity price forecast?

The primary driver is a lower outlook for oil prices following a memorandum of understanding (MOU) between the US and Iran in June. This led to a reassessment of market tightness, with the average Brent crude price for 2026 now forecast at $87/b, down from $103/b previously.

Will commodity prices return to pre-conflict levels?

No, the forecast indicates prices will remain higher for longer. Even with a projected retreat through 2028, the Materials Price Index (MPI) is expected to remain above fourth-quarter 2025 levels. This is attributed to lasting damage to production infrastructure and persistent geopolitical risk.

What are the biggest risks to this forecast?

The biggest risk is a failure of the ceasefire in the Middle East, which could lead to a re-closure of the Strait of Hormuz. This would create potential shortages of oil, gas, helium, sulfur, and aluminum, pushing prices significantly higher than the base-case scenario.

How is the economic outlook affecting the forecast?

A deteriorating growth outlook and softening demand are contributing to the decline in prices from their Q2 peaks. The forecast incorporates downward revisions to US real GDP growth, slower growth in mainland China, and a near-stagnant Eurozone.

The outlook for key commodities is as follows:

• Aluminum: Prices have corrected sharply lower as trade flows through the Strait of Hormuz improve and Gulf smelters resume production faster than expected, though risks remain tilted upward if regional disruption returns or equipment shortages delay repairs.
• Chemicals: The chemicals outlook has been revised lower because oil and feedstock price assumptions have eased, but upside price risk remains significant given the forecast’s reliance on a durable Middle East ceasefire and continued improvement in Hormuz trade flows.
• Steel: Steel prices are expected to peak in the second quarter in most regions and move lower in the second half of 2026 as demand stays flat to weaker and costs retreat, although Europe may see smaller declines because of tighter import quotas and the US peak is delayed to the third quarter.
• Oil: Crude prices have corrected lower after the US-Iran MOU, with Brent now forecast to average $87/b in 2026 and $82/b in 2027, but prices could rise toward $90/b through the summer—or higher if conflict re-escalates and the Strait of Hormuz is disrupted again.

—With contributions from Emiliano Pérez