Market News

By : Waliat  Musa

Energy prices are projected to surge by 24 per cent in 2026 to their highest level since Russia’s invasion of Ukraine in 2022, as escalating conflict in the Middle East triggers one of the most severe commodity market disruptions in recent years, the World Bank Group has said.

In its latest Commodity Markets Outlook, the Bank forecast that overall commodity prices will rise by 16 per cent in 2026, driven by sharply higher energy and fertiliser costs, alongside record price levels in key industrial metals.

The report highlights that attacks on energy infrastructure and persistent shipping disruptions in the Strait of Hormuz, a critical waterway responsible for about 35 per cent of global seaborne crude oil trade, have already triggered what it described as the largest oil supply shock on record, cutting global oil supply by about 10 million barrels per day at the peak of the crisis.

Although prices have moderated from recent highs, Brent crude still traded more than 50 per cent higher in mid-April than at the start of the year. It is projected to average $86 per barrel in 2026, up from $69 in 2025, assuming disruptions ease from May and maritime flows gradually normalise by late 2026.

World Bank Group Chief Economist and Senior Vice President for Development Economics, Indermit Gill, said the war is hitting the global economy in cumulative waves: first through higher energy prices, then higher food prices, and finally, higher inflation, which will push up interest rates and make debt even more expensive.

“The poorest people, who spend the highest share of their income on food and fuels, will be hit the hardest, as will developing economies already struggling under heavy debt burdens. All of this is a reminder of a stark truth: war is development in reverse.” Gill said.

The Bank further warned that fertiliser prices are expected to rise by 31 per cent in 2026, driven largely by a 60 per cent spike in urea prices. This would push fertiliser affordability to its weakest level since 2022, with implications for global agricultural output and food security.

According to the World Food Programme, a prolonged conflict could push up to 45 million additional people into acute food insecurity this year, as farmers face rising input costs and declining yields.

Base metals such as aluminium, copper and tin are also projected to hit record highs, supported by strong industrial demand from data centres, electric vehicles, and renewable energy expansion. Precious metals are similarly expected to remain elevated, with average prices forecast to increase by 42 per cent in 2026 as geopolitical uncertainty drives investors toward safe-haven assets.

The World Bank cautioned that these pressures will translate into higher inflation and weaker growth globally. Inflation in developing economies is projected at 5.1 per cent in 2026, one percentage point higher than pre-war expectations and above 4.7 per cent recorded last year.

Growth in developing economies is now expected to slow to 3.6 per cent in 2026, a 0.4 percentage point downward revision since January. Commodity importers and exporters alike are expected to feel the strain, with over 70 per cent of importing economies and more than 60 per cent of exporters likely to experience weaker-than-expected growth.

In a more severe scenario, Brent crude could spike to $115 per barrel if energy infrastructure is further damaged and supply recovery is delayed, potentially pushing inflation in developing economies to 5.8 per cent, the level last seen during the 2022 global energy crisis.

Deputy Chief Economist and Director of the Prospects Group, Ayhan Kose, said the succession of shocks over the decade has sharply reduced the fiscal space available to respond to the current historic energy supply crisis.

The report also noted that oil-price volatility tends to double during periods of heightened geopolitical tension, with a 1 per cent drop in oil production pushing prices up by an average of 11.5 per cent. It added that such shocks spill over into other markets, with impacts roughly 50 per cent larger than under normal conditions.

A 10 per cent oil price increase driven by geopolitical shocks, the Bank said, could raise natural gas prices by about 7 per cent and fertiliser prices by over 5 per cent, with effects typically peaking within a year, no deepening risks to food security and poverty reduction worldwide.