- Energy costs likely to rise by up to 24%: WB.
- War hit global economies hard: economist.
- WB says metal costs are expected to reach all-time highs.
The World Bank said on Tuesday that the war in the Middle East is expected to push energy costs this year to the highest since Russia’s full-scale invasion of Ukraine, while fertilizer affordability is also plunging.
“The war is hitting the global economy in cumulative waves: first through higher energy prices, then higher food prices and finally higher inflation,” World Bank chief economist Indermit Gill said as the organization released its latest outlook for commodity markets.
Energy costs have skyrocketed following the US-Israeli attacks on Iran from 28 February. Tehran retaliated by virtually blocking the Strait of Hormuz, a key waterway through which a fifth of global oil and liquid natural gas normally pass.
Its near-total shutdown has hit global supplies of other key commodities, including fertilizer.
Energy costs are expected to rise 24% this year, reaching the highest level since Russia’s invasion of Ukraine in 2022, the World Bank said on Tuesday.
Meanwhile, fertilizer costs are set to rise by 31% this year due to a 60% rise in urea prices – also dragging fertilizer affordability to its worst level since 2022.
This eats into farmers’ incomes and threatens crop yields, the World Bank said.
Total raw material costs are expected to increase by 16% in 2026, driven by fallout from the war and metal prices.
Costs of base metals such as aluminium, copper and tin are expected to hit all-time highs on the back of demand from industries such as data centers and electric vehicles, the bank said.
Oil prices have come off recent peaks, but are still significantly higher than before the Middle East war.
Brent oil prices are around 50% above pre-war costs, while the US benchmark West Texas Intermediate is correspondingly more than 40% higher.
Even if the worst disruptions end in May and shipping through the Strait of Hormuz recovers by late 2026, Brent crude is expected to average $86 a barrel. barrel this year, up from 69 dollars per barrel by 2025, the World Bank said.
Higher inflation is likely to push up interest rates and make 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 that are already struggling under heavy debt burdens,” he said.
