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| World Bank Warns Commodity Prices Could Rise 23% by Year-End |
The World Bank has warned that global commodity prices could rise by 23 percent by the end of this year. Energy prices are at their highest level in four years because of the war against Iran, while food prices are climbing due to conflicts around the world and the effects of El Niño. The warning comes against this backdrop.
Speaking in a statement released on Wednesday with the World Bank's "Commodity Markets Outlook" report, the organization's Deputy Chief Economist Ayhan Kose said, "Commodity markets are facing several major shocks at once." He added, "Higher energy costs and trade disruptions are pushing up prices of a wide range of commodities. This creates a risk of further increases in inflation and food insecurity. Economic growth may also slow."
Food prices are forecast to rise 10 percent in 2026, and by a further 7 percent next year. The reasons are disruptions to grain supply routes caused by conflict, the effects of a strong El Niño, and high energy and fertilizer prices.
El Niño is a naturally occurring weather phenomenon. Because of it, temperatures are expected to rise across large parts of the world this year, compounding the effects of human-caused climate change. As a result, food producers in various regions may face more floods, droughts, and extreme heat.
Rising Energy Prices
The World Bank report says energy prices could rise 32 percent this year, before easing somewhat in 2027. This forecast assumes that the conflicts involving Iran and Ukraine will not escalate again.
Since the United States and Israel began the war against Iran in late February, global energy and fertilizer prices have surged. The war spread violence across the Middle East. In response, Iran attacked US allies in the region and effectively blocked traffic through the Strait of Hormuz, a vital route for oil, natural gas, and fertilizer supplies.
The report warns that a "food crisis" could emerge if El Niño proves very strong, or if attacks on grain in the Black Sea intensify amid the Russia–Ukraine war. Such a crisis could also occur if energy prices rise further because of the Iran war.
According to the report, if these risks materialize together in an adverse scenario, the average price of crude oil could reach US$105 per barrel in 2027. Food prices could also be 12 percent higher than the baseline forecast, which would push them above their 2022 levels.
Since the war on Iran began, the World Bank has provided $8.7 billion in emergency assistance to vulnerable countries.
Kose said, "Protecting the poorest people must be a priority. Supporting low-income countries that are already struggling under heavy debt burdens must also be a priority."
Because of the Middle East war and the Russia–Ukraine war, global oil supply is forecast to fall 5.2 percent in 2026. Excluding the pandemic period, this would be the largest drop in more than four decades.
The report also forecasts that oil consumption will fall 2.5 percent this year. Without this forecast decline in consumption, oil prices would be projected to rise even further. In terms of the drop in oil consumption, it would be the third-largest on record, behind only the COVID-19 pandemic and the 1980 oil crisis.