- Energy costs expected to rise by up to 24%: BM.
- War hit world economies hard: economist.
- The World Bank says the cost of metals is expected to reach unprecedented highs.
The World Bank said on Tuesday that the war in the Middle East was expected to push energy costs this year to their highest level since Russia’s full-scale invasion of Ukraine, while fertilizer prices would also fall.
“War is hitting the global economy in cumulative waves: first through a rise in energy prices, then a rise in food prices and finally a rise in inflation,” World Bank chief economist Indermit Gill said as the organization released its latest outlook on commodity markets.
Energy costs soared after the US-Israeli strikes targeting Iran on February 28. Tehran responded by virtually blocking the Strait of Hormuz, a key waterway through which a fifth of the world’s oil and liquefied natural gas normally passes.
Its near-total closure affected the global supply of other important products, notably fertilizers.
Energy costs are expected to rise 24% this year, reaching their highest level since Russia’s invasion of Ukraine in 2022, the World Bank said Tuesday.
Meanwhile, fertilizer costs are expected to rise by 31% this year due to a 60% rise in urea prices, which will also drive fertilizer affordability to its worst level since 2022.
This weighs on farmers’ incomes and threatens crop yields, the World Bank said.
Overall, raw material costs are expected to rise 16% in 2026, driven by fallout from war and metal prices.
The cost of base metals like aluminum, copper and tin is expected to reach all-time highs due to demand from industries such as data centers and electric vehicles, the bank said.
Oil prices have reached recent highs, but remain significantly higher than before the Middle East war.
Brent oil prices are about 50% higher than pre-war costs, while the US benchmark West Texas Intermediate price is also more than 40% higher.
Even if the most severe disruptions end in May and shipping through the Strait of Hormuz recovers by the end of 2026, Brent oil is expected to average $86 a barrel this year, compared to $69 a barrel in 2025, the World Bank said.
Higher inflation is likely to push up interest rates, making debt more expensive, Gill added in a statement.
“The poorest people, who spend the largest share of their income on food and fuel, will be hardest hit, as will developing economies already struggling with heavy debt burdens,” he said.
