- Middle East Conflict to Drive 24% Surge in Energy Prices – World Bank Warns
The war in the Middle East is set to unleash the largest energy price shock in four years, with global commodity markets facing a fresh inflationary wave that could slow growth and deepen economic stress in developing countries, according to the World Bank’s latest Commodity Markets Outlook.
Energy prices are projected to surge by 24% in 2026, pushing them to their highest level since Russia’s invasion of Ukraine in 2022. The broader commodity complex is also under pressure, with overall prices expected to rise 16% this year, driven by spikes in energy, fertiliser and metals.
The scale of the disruption reflects what the World Bank describes as a severe supply shock linked to attacks on energy infrastructure and shipping disruptions through the Strait of Hormuz, a critical chokepoint that handles about 35% of global seaborne crude oil trade.
These disruptions have triggered what the Bank calls the largest oil supply shock on record, with an initial reduction of about 10 million barrels per day. Even after easing from recent peaks, Brent crude prices remain more than 50% higher than at the start of the year and are forecast to average $86 per barrel in 2026, up sharply from $69 in 2025.
For policymakers and markets, the implications go beyond oil. The World Bank’s chief economist, Indermit Gill, warned that the shock is cascading through the global economy in stages. “The war is hitting the global economy in cumulative waves: first through higher energy prices, then higher food prices, and finally, higher inflation,” he said, adding that the result will be higher interest rates and more expensive debt.
The knock-on effects are already visible in agricultural inputs. Fertiliser prices are projected to rise 31% in 2026, driven by a 60% jump in urea prices, pushing affordability to its worst level since 2022. This, the Bank warns, threatens crop yields and could intensify food insecurity globally, with as many as 45 million more people at risk of acute hunger if the conflict persists.
At the same time, metals markets are tightening. Prices for aluminium, copper and tin are expected to reach record highs, supported by structural demand from data centres, electric vehicles and renewable energy. Meanwhile, precious metals are forecast to rise 42%, reflecting heightened demand for safe-haven assets amid geopolitical uncertainty.
The macroeconomic consequences are increasingly clear. Inflation in developing economies is now projected to average 5.1% in 2026, up from 4.7% last year and about one percentage point higher than pre-war expectations. Growth is also being revised down, with developing economies expected to expand by 3.6%, a downgrade of 0.4 percentage point from earlier forecasts.
The burden will not be evenly distributed. The World Bank warned that 70% of commodity-importing countries and more than 60% of exporters could see weaker growth, as higher import costs erode incomes and export revenues are disrupted.
There is also a clear downside risk scenario. If the conflict escalates or supply disruptions persist, Brent crude could average as high as $115 per barrel in 2026, pushing inflation in developing economies to 5.8% levels not seen since the global price shock of 2022.
For governments, the policy trade-offs are tightening. Ayhan Kose, the World Bank’s deputy chief economist, warned that years of successive shocks have already eroded fiscal space, limiting the ability of governments to cushion the impact. He cautioned against broad subsidies, urging instead “rapid, temporary support targeted to the most vulnerable households”.
Beyond the immediate numbers, the report highlights a structural vulnerability: geopolitical shocks are now transmitting faster and more forcefully across commodity markets. The Bank estimates that oil-price volatility during high-risk geopolitical periods is about twice as high as during stable periods, with spillover effects into gas and fertiliser markets amplifying the overall economic impact.
For countries like Ghana, the implications are direct and immediate. Higher oil prices feed into fuel costs, transport inflation and power generation expenses, while rising fertiliser prices threaten agricultural productivity and food prices. Combined with tighter global financial conditions, the shock risks complicating ongoing efforts to stabilise inflation and sustain economic recovery.
The underlying message from the World Bank is stark: the global economy is once again confronting an energy-driven inflation cycle but this time with less fiscal room, higher debt, and more fragile growth. As Gill put it, “war is development in reverse.”
