The World Bank has projected that commodity prices will climb this year to their highest level since 2022, as the ongoing conflict in Iran continues to disrupt key industrial supplies, including oil and metals.
In its latest Commodity Markets Outlook released Tuesday, the Washington-based lender projected that its commodity price index will increase by about 16 per cent this year.
This would mark the first annual gain since Russia’s invasion of Ukraine unsettled global energy markets and contributed to a surge in inflation worldwide.
The Bank stated that the energy and fertilizer prices have jumped to multi-year highs since the outbreak of the Iran conflict in late February.
The partial shutdown of the Strait of Hormuz—a key route that previously carried about a third of global seaborne crude oil trade, has triggered an unprecedented shock to global energy and commodity markets.
“The war is hitting the global economy in cumulative waves: first through higher energy prices, then higher food prices, and finally, higher inflation,” said Indermit Gill, chief economist at the World Bank.
The World Bank’s energy price index is projected to rise by about 24 per cent this year, based on a baseline scenario in which the “most acute” supply disruptions ease by May.
At the same time, Brent crude is expected to average US$86 per barrel, a significant upward revision from the US$60 per barrel forecast made in January.
Natural gas and fertilizer markets have also been hit hard by the conflict, with prices climbing sharply.
The World Bank projects fertilizer costs to increase by 31 per cent this year, raising concerns about farmer incomes and potential impacts on future crop yields.
This could eventually translate into higher food prices and worsen food insecurity. The closure of the Strait has also disrupted key supply routes for several economies that depend heavily on food imports, while rising fuel and freight costs are increasing the price of other essential goods.
The World Bank warned that if oil prices remain above US$100 per barrel, up to 45 million more people could fall into acute food insecurity this year.
