Commodity Price Watch: September 2026

What is the forecast for global manufacturing costs through 2027?

Global manufacturing costs are expected to remain elevated through 2027 due to persistent geopolitical tensions in the Middle East, which disrupt trade and energy flows. The S&P Global Market Intelligence Materials Price Index will trend higher into early 2027. While prices will not return to Q2 2026 peaks, costs for energy, freight, and industrial inputs will stay well above pre-conflict expectations.

Why are supply-side constraints driving the current risk environment?

The current risk environment is being driven more by supply-side constraints and geopolitical disruption than by broad economic growth. Ongoing conflict in the Middle East supports higher costs for energy, freight, and logistics, while climate events add further risk.

Concentrated demand from sectors like AI data centers, electrification, and defense is increasing competition for key inputs such as copper and electrical equipment, straining lead times and keeping prices high.

Key insights from the latest analysis indicate that a combination of geopolitical and market-specific factors will continue to influence industrial costs.

• Disruption to trade through the Strait of Hormuz has led to upward revisions for crude oil, diesel, and global natural gas forecasts.
• The outlook for chemicals is more bullish due to stronger oil and feedstock cost assumptions, though weak demand and high inventories will likely pressure most polymer markets.
• Global steel markets are increasingly fragmented by trade barriers, with excess supply in Asia and weak demand in Europe contrasting with high prices in the US.
• Upside risk remains for nonferrous metals, especially copper, while aluminum prices are expected to ease only gradually as Gulf production recovers.

What is the impact of Middle East conflict on manufacturing costs?

The diplomatic standstill between the US and Iran, ongoing fighting and continued disruption to shipping through the Strait of Hormuz have increased the risk that elevated manufacturing costs will persist.

The base case no longer assumes a clear end to the war in the Middle East. Instead, exports from the Gulf region are expected to rise and fall as security conditions affect ships’ willingness to transit the strait, with only gradual improvement over the course of 2027.

Damage to aluminum smelters, petroleum facilities and chemical refineries will continue to constrain supply while repairs and replacement of specialized equipment could take months or years. Consequently, even when commodity prices retreat from temporary peaks, energy, freight and industrial input costs will remain well above expectations prior to the latest Middle East conflict.

How will the Materials Price Index (MPI) trend through 2027?

The Materials Price Index (MPI) by S&P Global Market Intelligence will trend higher through the first quarter of 2027 but will not return to the peak levels seen in the second quarter of 2026.

Improved crude oil flows, recovering metals exports and softer demand should bring industrial materials prices modestly lower through the remainder of 2027. The cost outlook is also becoming more differentiated by market.

Higher oil and feedstock assumptions have lifted the 2027 outlook for chemicals, particularly oil-sensitive products such as benzene, even though weak demand, ample capacity and elevated inventories will limit the ability of most polymer producers to sustain price increases.

Steel markets remain fragmented by protectionism: Excess Asian supply and weak European demand point to lower global prices in 2027 but trade barriers, elevated freight costs and slow growth in US imports are allowing domestic US mills to retain pricing leverage for longer.

Nonferrous metal risks also remain skewed upward, particularly for copper, while aluminum prices should ease only gradually as Gulf production recovers and demand softens.

What are the key drivers of the 2027 risk environment?

The 2027 risk environment is being driven less by broad economic growth and more by supply-side constraints, geopolitical disruption, and concentrated demand from AI data centers, electrification, and defense manufacturing.

The war in the Middle East remains the most significant near-term risk, supporting higher energy, freight, insurance and logistics costs across global supply chains. Climate-related disruptions, including the potential for a super El Niño, add further upside risk to inflation and transportation costs.

While manufacturing and construction demand remains constrained at an aggregate level, strong demand growth from a narrow set of end markets is increasing competition for key industrial inputs including copper, electrical equipment, electronics and skilled labor. Prices will remain elevated and lead times strained for this group of inputs key to the data center build-out.

Highlights

• Trade flows through the Strait of Hormuz remain disrupted as hostilities between the US and Iran intensify and no off-ramp from the conflict appears likely. Crude oil, diesel and global natural gas forecasts have been revised higher as a result. While oil production outside the Gulf region has increased, this is not sufficient to offset the loss of Middle East production, although easing global demand will keep prices from spiking.
• The chemicals outlook is now more bullish on stronger oil and feedstock cost assumptions. There is further upside on higher energy costs and upside risk if the current surge in oil prices persists. Despite the higher outlook for production costs, weak demand, high inventories and ample supply are still expected to pressure most polymer markets through 2027.
• An increasing trend toward rising trade barriers 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 in 2027. The supply is available globally, but the shifting trade policies mean a sourcing strategy that worked in recent years may not be optimal over the next year.
• On balance, risk remains skewed to the upside for nonferrous metals, particularly copper, where resilient demand has exacerbated a tightening of availability due to mine supply disruptions. Aluminum is still expected to ease into 2027 as supply gradually recovers and demand softens, although prices will remain elevated compared with historical norms, particularly in the US because of increased tariff uncertainty.

Key assumptions

• Oil Price Forecast: The oil price forecast has been revised upward this month, with prices now forecast to remain above US$80/barrel through 2027. There is scope for further sporadic increases through 2027 as hostilities in the Middle East continue. 
• US Real GDP Growth: S&P Global Market Intelligence's 2026 forecast for US real GDP growth remains unchanged in 2026 while growth in 2027 and 2028 was revised up. Behind the revision to growth were stronger momentum in equipment spending and higher equity values boosting personal consumption expenditures. 
• Monetary Policy: Monetary policy tightening is becoming more widespread. The European Central Bank and the US Federal Reserve hiked interest rates at their September meetings. There is a low-risk possibility of a further hike by the ECB in late 2026 or early 2027, with the likelihood of this increasing if energy prices continue to rise and high-frequency indicators continue to show a resilient economy and a broadening of inflation. 

—With contributions from Emiliano Pérez