The World Bank said global commodity prices are expected to rise this year to their highest since 2022 as the war in Iran continues to disrupt supplies to key industries such as oil and metals.
According to its Commodity Market Outlook report released on Tuesday, the World Bank expects the commodity price index to rise by about 16% this year.
This would be the first annual increase since Russia's invasion of Ukraine, which disrupted energy markets and fueled global inflation, the bank said.
Since the start of the Iran war in late February, energy and fertilizer prices have risen to their highest levels in years.
The World Bank said the closure of the Strait of Hormuz, which before the conflict accounted for about 35% of the world's maritime crude oil trade, has sent shockwaves through energy and commodity markets.
Rising Energy, Fertilizer & Food Prices
Indermit Gill, the World Bank’s chief economist, said, “The war has had a cascading effect on the global economy: first through higher energy prices, then food prices, and finally higher inflation.”
The World Bank’s energy price indicator is expected to rise by about 24% this year based on a baseline projection that assumes the worst of the supply disruptions will end in May. Meanwhile, Brent oil prices are forecast to average US$86 (RM339.71) a barrel this year, up from an estimate of US$60 a barrel in January.
Natural gas and fertilizer markets have also seen significant price increases due to the conflict. The World Bank predicts fertilizer costs will rise by 31% this year, putting farmers’ incomes and future crop yields at risk.
The increase has the potential to lead to higher food costs and exacerbate food insecurity. The closure of the Strait of Hormuz has closed off vital routes to several economies that rely on food imports, while higher fuel and transportation costs have pushed up the prices of other essential goods.
The World Bank has stated that if oil prices remain above US$100 a barrel, it “could push up to 45 million more people into severe food insecurity this year.”
Gill added, “The poorest, who spend the majority of their income on food and fuel, will be hit hardest. All of this reminds us of a harsh truth: war is a backward development.”
