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A projected 24% surge in global energy prices this year is set to anchor a broader, longer-lasting commodity shock, with inflationary pressures and slower growth likely to persist into 2027 as the Middle East conflict continues to disrupt supply chains, the World Bank Group said on Apri; 28.
In its latest Commodity Markets Outlook, the bank warned that the anticipated spike in energy costs—driven by supply disruptions and heightened geopolitical risk—will cascade through food, fertilizer and industrial markets, shaping the global economic trajectory well beyond the immediate crisis.
At the center of the disruption is the Strait of Hormuz, a critical artery for global oil flows. While baseline projections assume shipping gradually stabilizes by late 2026, the outlook remains highly contingent on the conflict’s evolution. Any prolonged disruption is expected to keep oil markets tight and prices structurally elevated.
Brent crude is forecast to average $86 per barrel in 2026, but the bank signaled that a more adverse scenario—marked by sustained infrastructure damage and delayed export recovery—could push prices as high as $115, amplifying second-round effects across transport, agriculture and manufacturing.
“The global economy is likely to absorb these shocks in successive waves,” said Indermit Gill, pointing to a chain reaction from energy to food to core inflation. Such dynamics, he indicated, risk prolonging tight monetary conditions and raising borrowing costs, particularly for heavily indebted developing economies.
Looking ahead, inflation in developing economies is projected to average 5.1% in 2026, with risks tilted upward if commodity prices remain elevated. Growth is expected to slow to 3.6%, as higher import bills and weaker trade flows weigh on consumption and investment.
The report suggests that repeated global shocks—from the pandemic to the Ukraine war and now the Middle East conflict—may be entrenching a more volatile commodity cycle. Oil-price swings during periods of geopolitical stress are typically twice as large as in stable conditions, complicating policymaking and investment planning.
Food security is expected to emerge as a key pressure point. Fertilizer prices, projected to rise 31% this year, could remain high if energy markets stay tight, eroding farm margins and constraining future output. The World Food Program has warned that a prolonged conflict risks pushing tens of millions more into acute food insecurity.
At the same time, structural demand for metals—driven by data centers, electric vehicles and renewable energy—may keep prices elevated even as global growth moderates, adding to cost pressures across supply chains.
For governments, the coming months are likely to test fiscal and policy resilience. Ayhan Kose cautioned that with fiscal space already eroded by successive crises, policy responses will need to be tightly targeted to protect vulnerable households without distorting markets or worsening debt burdens.
The report ultimately points to a fragile forward path: even if the most acute disruptions ease, the aftershocks—from energy to inflation to growth—are expected to linger, raising the risk that the current crisis evolves into a more prolonged period of high commodity prices and uneven global recovery.
