(April 28): Global commodity prices are set to increase this year to the highest since 2022 as the war in Iran continues to disrupt key industrial supplies like oil and metals, the World Bank Group said.
The bank’s commodity-price index is seen climbing about 16% this year, the Washington-based lender said in its latest Commodity Markets Outlook report on Tuesday. That would mark the first annual increase since Russia’s invasion of Ukraine roiled energy markets and fanned global inflation, according to the bank.
Energy and fertiliser prices have surged to multi-year highs since the start of the Iran war in late February. The effective shutdown of the Strait of Hormuz, which accounted for about a third of global seaborne trade in crude oil before the conflict, triggered a historic shock to energy and commodity markets, the bank said.
“The war is hitting the global economy in cumulative waves: first through higher energy prices, then higher food prices, and finally, higher inflation,” said Indermit Gill, chief economist at the World Bank.
The World Bank’s energy price gauge is seen increasing around 24% this year, in a baseline projection where the “most acute” supply disruptions end in May. Meanwhile, Brent crude is seen averaging US$86 a barrel this year, an upward revision from US$60 a barrel estimate in January.
Natural gas and fertiliser markets have also seen sharp price increases due to the conflict. The World Bank sees fertiliser costs climbing 31% this year, which poses a risk to farmer incomes and future crop yields.
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That could eventually filter through to higher food costs and raise food insecurity. The closure of the strait has cut off key routes for several economies reliant on imported foods, while higher fuel and freight costs are pushing up prices for other essentials. If oil prices remain above US$100 a barrel, it “could push up to 45 million more people into acute food insecurity this year,” the World Bank said.
“The poorest people, who spend the highest share of their income on food and fuels, will be hit the hardest,” said Gill. “All of this is a reminder of a stark truth: war is development in reverse.”
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