Global Energy Shock to Drive Commodity Prices to Highs, Threatening Growth and Food Security: World Bank

As the world grapples with overlapping crises—conflict, inflation, and climate pressures—the latest outlook paints a sobering picture of the global economy.

A fresh global energy shock triggered by escalating conflict in the Middle East is set to send commodity prices soaring in 2026, with far-reaching consequences for inflation, economic growth, and food security worldwide, according to the World Bank's latest Commodity Markets Outlook.

The report warns that energy prices are projected to surge by 24 percent this year, reaching their highest levels since the 2022 Ukraine war, while overall commodity prices are expected to rise 16 percent in 2026.

Oil supply shock fuels global price surge

At the centre of the crisis is a major disruption to global oil supply, driven by attacks on energy infrastructure and shipping bottlenecks in the strategically critical Strait of Hormuz, through which around 35 percent of the world's seaborne crude oil passes.

The conflict has triggered what the World Bank describes as the largest oil supply shock on record, with an initial reduction of 10 million barrels per day.

As a result:

• Brent crude prices have risen more than 50 percent since the start of the year

• Prices are forecast to average $86 per barrel in 2026, up from $69 in 2025

In a worst-case scenario involving prolonged disruptions, oil prices could climb as high as $115 per barrel, intensifying global economic pressures.

Ripple effects across food and agriculture

The energy shock is rapidly spilling over into agriculture and food systems, particularly through rising fertilizer costs.

• Fertilizer prices are expected to increase by 31 percent in 2026

• Urea prices alone could jump by 60 percent

This surge is likely to:

• Reduce farmers' purchasing power

• Lower crop yields

• Increase global food prices

The World Food Programme warns that these pressures could push up to 45 million more people into acute food insecurity if the conflict persists.

Metals and safe-haven assets hit record highs

Beyond energy and agriculture, the shock is driving up prices across other commodity classes:

• Base metals such as copper, aluminum, and tin are reaching record highs due to strong demand from sectors like electric vehicles, renewable energy, and data centres

• Precious metals are projected to rise by 42 percent in 2026, as investors seek safe-haven assets amid geopolitical uncertainty

Inflation rises, growth slows

The combined effect of higher energy, food, and commodity prices is expected to fuel inflation globally while dampening economic growth—particularly in developing economies.

Key projections include:

• Inflation in developing economies rising to 5.1 percent in 2026, up from earlier forecasts

• Economic growth slowing to 3.6 percent, a downward revision from previous estimates

The impact will not be evenly distributed:

• Countries directly affected by conflict will face the most severe disruptions

• 70 percent of commodity-importing countries and over 60 percent of exporters could see weaker growth

Vulnerable populations at greatest risk

World Bank Chief Economist Indermit Gill warned that the crisis will hit the poorest hardest, as they spend a larger share of their income on food and energy.

"The war is hitting the global economy in waves—first energy, then food, then inflation and debt," Gill said, describing the situation as a stark reminder that "war is development in reverse."

Rising inflation is also expected to push up interest rates, increasing borrowing costs for already heavily indebted developing countries.

Limited fiscal space for governments

Governments face growing constraints in responding to the crisis, with many already stretched by previous global shocks, including the pandemic and earlier commodity spikes.

World Bank economists caution against broad, untargeted subsidies, urging instead:

• Targeted support for vulnerable households

• Temporary relief measures that avoid distorting markets

• Policies that preserve fiscal stability

"The succession of shocks has sharply reduced governments' ability to respond," said Ayhan Kose, World Bank Deputy Chief Economist.

Volatility amplifies the crisis

The report highlights that geopolitical tensions significantly amplify market volatility:

• Oil price volatility during crises is twice as high as in stable periods

• A 1 percent drop in oil supply can raise prices by 11.5 percent

• A 10 percent oil price increase can trigger spikes in natural gas and fertilizer prices within a year

These cascading effects underscore the interconnected nature of global commodity markets—and the speed at which shocks can spread across sectors.

A fragile global outlook

As the world grapples with overlapping crises—conflict, inflation, and climate pressures—the latest outlook paints a sobering picture of the global economy.

With risks tilted to the downside and uncertainty remaining high, the report emphasizes the need for coordinated international action to stabilise markets, protect vulnerable populations, and maintain economic resilience.

Without such efforts, the current energy shock could evolve into a broader development crisis—reversing years of progress in poverty reduction and global economic stability.