Commodity Price Watch: August 2026

Manufacturing costs will remain above 2025 levels through 2026 and into 2027. Ongoing supply disruptions, geopolitical tensions impacting trade routes and damage to production infrastructure for materials like aluminum and chemicals will keep industrial input costs high.

The S&P Global Market Intelligence Materials Price Index (MPI) is expected to decline from its second-quarter 2026 peak, yet remain 20% above the 2025 average in Q4 2026 and 14% above the 2025 average in Q4 2027. This reflects persistent cost pressures. 

Supply risks are concentrated in energy, refined products, aluminum and other industrial materials. Weak demand may cap some price gains but will not return costs to 2025 levels in the near term.

• The Materials Price Index (MPI) is forecast to be 20% higher in Q4 2026 and 14% higher in Q4 2027 compared to the 2025 average.
• Geopolitical conflict impacting the Strait of Hormuz creates upside price risk for oil, gas, helium, sulfur, and aluminum due to potential shortages and infrastructure damage.
• The global steel market is becoming more fragmented due to increased trade barriers, with excess supply in Asia, weak demand in Europe, and high prices in the US.
• The chemicals outlook is generally bearish due to weaker demand and high inventories, and energy and feedstock volatility remains the main upside risk.
• Climate-related chokepoints, such as low water levels in the Panama Canal and European rivers, add further risk by limiting shipping and power generation.

Since our July Commodity Price Watch, the S&P Global Market Intelligence forecast has shifted from cautious price relief to renewed supply-risk pressure.

The prior outlook assumed easing US-Iran tensions and improving trade flows through the Strait of Hormuz would enable commodity prices to retreat from second-quarter peaks.

The updated forecast reflects the expiration of the memorandum of understanding between the US and Iran on Aug. 17, continued strikes by Iran against shipping in the Strait of Hormuz, and the absence of scheduled talks. These developments have raised energy risks and kept industrial input costs elevated.

As a result, natural gas, aluminum and copper forecasts have been revised upward, while chemicals and resins have turned more bearish as weak demand, high inventories and improving supply outweigh earlier conflict-related price support.

The August 2026 forecast is shaped by significant global disruptions. Renewed hostilities in the Middle East would threaten traffic through the Strait of Hormuz, elevating oil, gas, and chemical prices.

Simultaneously, drought-driven low water levels in key waterways like the Panama Canal and Rhine River create logistical chokepoints. These factors compound existing supply chain vulnerabilities, creating significant upside risk for industrial material prices.

Geopolitical tensions and supply chain damage drive costs 

The expiration of the 60-day memorandum of understanding between the US and Iran on Aug. 17, continued strikes by Iran against shipping in the Strait of Hormuz, and absence of scheduled talks show the risk to the outlook.

Oil and gas prices are elevated, although oil in particular is down significantly from early spikes. Damage already done to aluminum smelters and petroleum and chemical refineries will take months to repair. If replacement equipment becomes scarce, then the timeline for repairs is in years.

Inventories are also drawing lower, reducing the cushion from further disruption. So, 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 therefore demand, but that will be small comfort to most companies. Lower prices because of weak demand are a Pyrrhic victory at best. In other words, any price relief caused by weak demand would reflect deteriorating economic conditions rather than improved supply fundamentals.

Materials Price Index to retreat but remain elevated

The Materials Price Index (MPI) by S&P Global Market Intelligence has peaked and will retreat through the second half of 2027.

Our outlook assumes that ship traffic in the Strait of Hormuz will resume in fits and starts with significant improvement by early 2027. A combination of improved crude oil flows, stronger exports of metals and soft demand brings industrial prices modestly lower over the remainder of 2026.

Still, price levels remain elevated. By the fourth quarter of 2026, the Materials Price Index (MPI) will be 20% higher than the 2025 average. By the fourth quarter of 2027, the MPI will be 14% higher than the 2025 average. So the S&P Global Market Intelligence outlook is for a decline from second-quarter 2026 peak levels, but industrial prices will stay significantly higher than 2025 through the near term.

Upside risks from conflict and climate chokepoints

If conflict flares up and traffic out of the Gulf does not recover 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. Refined petroleum products are already squeezed, with diesel prices staying elevated even as crude oil retreated.

The world also faces drought-driven chokepoints as low water levels reduce passage through key waterways including the Panama Canal and the Rhine River, a heightened risk during El Niños. Low water levels in rivers in Europe and Asia have limited electric power generation at hydro and nuclear plants in recent years, adding upside cost risk should electricity supply tighten.

The bottom line is that although industrial materials prices should decline through late 2026 and in 2027, they will remain higher than in recent years with risk to the upside.

Highlights

• Trade flows through the Strait of Hormuz remain minimal as the US and Iran fail to achieve progress in negotiations. 
• Global natural gas prices will be moderately higher than previously forecast. Storage levels in Europe are running near their low over the last five years. Increased import capacity relative to 2022 means that prices will not skyrocket, but weak fill levels will help keep prices elevated through the 2026-27 winter.
• The chemicals and resins outlook has become more bearish overall, especially in polymer markets. Weaker demand, high inventories and improving supply replace earlier Middle East conflict-related price support. With conditions in the Gulf unresolved, energy and feedstock volatility remains the main upside risk but prices are generally expected to ease through 2027.
• The spreading trend to increase trade barriers to steel imports leaves the global steel market significantly more fragmented than in recent years. Excess supply in Asia, weak demand in Europe and prices so high in the US that there is significant arbitrage toward imports will help drive prices lower toward late 2026 and early 2027. 
• Risk leans to the upside for nonferrous metals pricing. Aluminum prices will decline through late 2026 and early 2027, assuming production and exports rebound in the Gulf Cooperation Council (GCC) markets. Expect little to no downtrend if GCC output remains subdued amid continued disruption from the Gulf conflict.

Key assumptions

• Oil Price Forecast: We assume traffic in the Strait of Hormuz recovers in fits and starts and by late 2026 or early 2027 maintains significantly higher flows. Oil prices stay below US$90/barrel through 2028.
• US Real GDP Growth: S&P Global Market Intelligence's 2026 forecast for US real GDP growth has been revised upward since July, while growth in 2027 was unrevised. Factors that have been driving material changes in our inflation forecasts recently — oil prices and tariffs — were more consistent this month. 
• US Monetary Policy: The US Federal Reserve left interest rates unchanged at the July meeting, in line with our expectations. We continue to expect the Fed to hold until June 2027, when it will make the first of two 25-basis-point rate cuts for the year. 

How the Materials Price Index (MPI) supports strategic sourcing

This analysis highlights the extreme volatility and fragmentation facing procurement and supply chain leaders. A sourcing strategy that worked in recent years may not be optimal over the next year.

The S&P Global Market Intelligence Materials Price Index (MPI) provides the data-driven foresight needed to navigate this uncertainty. By tracking price movements across key commodities, the MPI helps organizations anticipate cost pressures, identify arbitrage opportunities mentioned in the steel market analysis. The MPI also helps to build more resilient sourcing strategies in the face of geopolitical and climate-related disruptions.

—With contributions from Emiliano Pérez