In recent years, commodity markets have been shaken by a series of unprecedented disruptions. The COVID-19 pandemic, Russia’s invasion of Ukraine, China’s export restrictions on critical minerals, and, more recently, the closure of the Strait of Hormuz have triggered supply shocks across multiple sectors, contributing to sharp price spikes, inflationary pressure and heightened growth volatility.

The economic literature has long highlighted the importance of supply-side disturbances in driving business cycles. Since the seminal work of Kydland and Prescott (1982), macroeconomists have sought empirical measures of supply shocks that propagate through production networks. Research also shows that central banks must carefully calibrate their responses to commodity market disruptions, especially when inflationary pressures conflict with output stabilisation (McLeay et al. 2020). Yet empirical analysis of commodity-driven macroeconomic fluctuations remains heavily concentrated on oil markets, leaving the role of other essential commodities relatively unexplored.

In a new paper, we address this challenge by developing a comprehensive framework that constructs supply and demand proxies across the entire spectrum of commodities (Lumbanraja  et al. 2026). Our findings show that supply disruptions in non-oil commodities affect inflation and industrial production at least as strongly as oil disruptions, challenging the conventional policy focus on oil alone.

A central challenge in evaluating the macroeconomic impact of commodities is disentangling supply from demand disruptions. Because commodity prices respond endogenously to broader economic conditions, causal identification becomes particularly difficult. We tackle this challenge using textual analysis of more than one million news articles covering 20 commodity markets spanning energy, metals, agriculture, and livestock. Our methodology identifies supply and demand developments at daily frequency, while controlling for autocorrelation and both within- and cross-market spillovers. This framework allows us to measure previously undocumented commodity disturbances beyond the well-studied oil sector with precision.

Non-oil commodities: The overlooked source of macroeconomic volatility

Our research delivers two key insights.

First, supply disruptions in metals, grains, and livestock markets can generate macroeconomic effects comparable to oil shocks. When adverse supply disturbances hit these non-oil commodities, inflation rises persistently while industrial production falls, closely resembling the stagflationary dynamics typically associated with oil price spikes (Figure 1).

Second, the macroeconomic impact of commodity supply disruptions varies with countries’ commodity trade exposure. Net importers face stronger inflation pass-through and sharper declines in industrial production, while net exporters remain partly insulated (Figure 2). Difference-in-differences estimates that interact supply disturbance measures with countries’ commodity trade balances confirm this heterogeneous pattern (Figure 3).

Figure 1 Responses of CPI and industrial production to oil and non-oil disturbances

a) CPI (left: Brent, right: production-weighted non-oil commodity basket)

b) Industrial production (left: Brent, right: production-weighted non-oil commodity basket)

Note: This figure presents the impulse response of CPI and industrial production to a one-standard-deviation supply contraction in oil and a non-oil commodity basket across a panel of 61 countries. Driscoll-Kraay standard errors are used.

Figure 2 Responses of CPI and industrial production to non-oil disturbances: Commodity net exporters and commodity net importers

a) Net non-oil importers and exporters, CPI

b) Net non-oil importers and exporters, industrial production

Note: This figure presents the impulse response of CPI and industrial production to a one-standard-deviation supply contraction in a non-oil commodity basket for net commodity exporters (left) and importers (right), across a panel of 61 countries. Driscoll-Kraay standard errors are used.

Figure 3 Responses of CPI and industrial production to non-oil disturbances: importers versus exporters

Note: This figure presents the differential impulse response of CPI and industrial production to a one-standard-deviation supply contraction in a non-oil commodity basket, interacted with the normalized trade balance for a panel of 61 countries. Time fixed effects absorb common global shocks, so identification comes from cross-sectional variation in the trade balance within each period. Driscoll-Kraay standard errors are used.

Understanding what drives commodity disruptions

What forces drive these commodity market disturbances? We additionally classify underlying drivers into four categories – business-cycle developments, geopolitical risk, natural disasters, and climate change – revealing systematic patterns across markets:

• Natural disasters emerge as the dominant trigger for supply disruptions in agriculture and energy.
• Geopolitical risks mainly affect energy and precious metals markets and have recently become important also for agricultural commodities (see Figure 4).
• Business-cycle dynamics primarily shape demand conditions.
• Climate change concerns increasingly impact energy and industrial metals markets.

This classification highlights vulnerabilities in global supply chains. Agricultural markets, for example, face heightened exposure to weather-related events, whereas metals and energy markets are particularly sensitive to geopolitical tensions. Understanding these patterns provides valuable insights into both risk management and policy responses.

Figure 4 Geopolitical risk factor

Note: This figure plots the decomposition across commodity categories of the Geopolitical Risk Theme for the period between 2001 and 2023.

Business cycle implications of commodity supply shocks

These results have important implications for how we understand business cycle dynamics. Although macroeconomic discussions in recent decades have focused on demand shocks, our research shows that supply-side disruptions – particularly those originating in commodity markets – also play a crucial role in generating economic volatility. The COVID-19 pandemic offers a clear illustration of this dynamic: supply bottlenecks fuelled inflation even as aggregate demand remained subdued. Our results suggest that the pandemic was not an isolated event but part of a broader pattern of supply-driven macroeconomic fluctuations. In this context, the ability to measure diverse commodity supply shocks and empirically disentangle their effects is particularly valuable for understanding and managing macroeconomic risks.

The heterogeneous transmission of commodity shocks across countries also helps explain divergent economic outcomes following global disruptions. Countries with different commodity trade exposures experience different effects from the same global shock, creating important challenges for policy coordination among international institutions. Moreover, commodity shocks can propagate beyond the real economy through financial channels. As Eberhardt and Presbitero (2021) show, commodity price shocks can spread through financial systems and can trigger banking crises, with consequences extending well beyond their direct inflationary effects. Our findings suggest that these financial stability risks may originate from a much broader set of commodity markets than previously recognised.

Policy implications

Our findings carry four important implications for policymakers:

First, inflation monitoring frameworks should incorporate supply conditions across the full commodity spectrum rather than focusing primarily on oil. The comparable or even larger macroeconomic impact of non-oil commodity disruptions suggests that narrowly focused monitoring may overlook significant sources of inflationary pressure.

Second, differences in countries’ commodity trade exposures create asymmetric vulnerabilities that call for tailored policy responses. Net importers face greater macroeconomic risks from supply disruptions and may therefore benefit from stronger hedging strategies or greater diversification of supply sources. In such cases, an effective policy response should combine carefully calibrated monetary policy with targeted fiscal measures that directly address supply bottlenecks and mitigate their heterogeneous effects across economic agents.

Third, as geopolitical risk emerges as an important driver of commodity supply disruptions, supply-chain resilience becomes a central macroeconomic concern. Policies such as diversifying supply chains for critical commodities, expanding strategic reserves, providing targeted support to vulnerable sectors, strengthening international coordination through multilateral institutions, and investing in substitution technologies to reduce long-term dependence on vulnerable commodities could significantly enhance economic stability.

Fourth, our methodology offers policymakers a tool to detect early warning signals of supply pressures across commodity markets, enabling more timely and better calibrated responses to emerging disruptions.

Conclusion

The traditional focus on oil markets has led economists and policymakers to understate the broader macroeconomic role of commodity supply shocks. Yet, as geopolitical tensions and climate-related disruptions increasingly threaten diverse commodity supplies, a more comprehensive approach to understanding these shocks has become essential for safeguarding economic stability.

By demonstrating that non-oil commodity disruptions can influence inflation and output as strongly as oil shocks, our findings call for a broader perspective of the supply-side forces shaping business cycles. In an era of fragmented supply chains and intensifying geopolitical competition, such a framework provides a valuable framework for navigating an increasingly complex global economic landscape.

Authors’ note: The views expressed in this column are those of the authors and should under no circumstances be interpreted as reflecting those of the Banque de France or the Eurosystem.

References

Eberhardt, M and A Presbitero (2021), “Commodity prices and banking crises”, VoxEU.org, 26 April.

Kydland, F and E Prescott (1982), “Time to Build and Aggregate Fluctuations”, Econometrica 50(6): 1345-1370.

Lumbanraja, A, S Mouabbi, E Passari and A Rousset Planat (2026), “Beyond Oil: The Origins of Commodity Price Fluctuations”, CEPR Discussion Paper No. 21244.

McLeay, M., S. Tenreyro and T. Drechsel (2020), “Monetary policy for commodity booms and busts”, VoxEU.org, 16 January.