- Commodity prices forecast to rise by 16 percent this year, fueling inflation and slowing growth
WASHINGTON, USA — Energy prices are projected to surge by 24 percent this year to their highest level since Russia’s invasion of Ukraine in 2022, as the war in the Middle East sends a severe shock through global commodity markets, according to the World Bank Group’s latest Commodity Markets Outlook. Overall commodity prices are forecast to rise 16 percent in 2026, driven by soaring energy and fertiliser prices and record-high prices for several key metals.
The shock will have serious implications for job creation and development, the analysis indicates.
Attacks on energy infrastructure and shipping disruptions in the Strait of Hormuz, which handles about 35 percent of global seaborne crude oil trade, have triggered the largest oil supply shock on record, with an initial reduction in global oil supply of about 10 million barrels per day. Even after moderating from their recent peak, Brent oil prices remained more than 50 percent higher in mid-April than they were at the start of the year. Brent oil is forecast to average $86 a barrel in 2026, up sharply from $69 a barrel in 2025. These forecasts assume that the most acute disruptions end in May and that shipping through the Strait of Hormuz gradually returns to pre-war levels by late 2026.
“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,” said Indermit Gill, the World Bank Group’s chief economist and senior vice president for development economics. “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.”
Fertiliser prices are projected to increase by 31 percent in 2026, driven by a 60 percent jump in urea prices. Fertiliser affordability will fall to its worst level since 2022, eroding farmers’ incomes and threatening future crop yields. If the conflict proves more prolonged, these pressures on food supply and affordability could push up to 45 million more people into acute food insecurity this year, according to the World Food Programme.
Prices for base metals, including aluminum, copper, and tin, are also expected to reach all-time highs, reflecting strong demand related to industries including data centers, electric vehicles, and renewable energy. Precious metals continue to break price and volatility records, with average prices forecast to increase 42 percent in 2026, as geopolitical uncertainty fuels demand for safe-haven assets.
Rising commodity prices caused by these shocks will increase inflation and dampen growth worldwide. In developing economies, inflation is now projected to average 5.1 percent in 2026 under the baseline assumptions—a full percentage point higher than was expected before the war and an increase from 4.7 percent last year. Growth in developing economies will also deteriorate as higher prices for essentials weigh on incomes and exports from the Middle East face sharp curbs. Developing economies are expected to grow by 3.6 percent in 2026, a downward revision of 0.4 percentage point since January. Economies directly impacted by conflict will be hardest hit, and 70 percent of commodity importers and more than 60 percent of commodity exporters worldwide could see weaker growth than was projected in January.
Commodity prices could rise even higher if hostilities escalate or supply disruptions from the war last longer than projected. Brent oil prices could average as high as $115 a barrel in 2026 in a scenario where critical oil and gas facilities suffer more damage and export volumes are slow to recover. This in turn would have ripple effects on prices for fertiliser and alternative energy sources such as biofuels. Under this scenario, inflation in developing economies could rise to 5.8 percent this year, a level exceeded only in 2022 over the past decade.
“The succession of shocks over the decade has sharply reduced the fiscal space available to respond to the current historic energy supply crisis,” said Ayhan Kose, the World Bank’s deputy chief economist and director of the Prospects Group. “Governments must resist the temptation of broad, untargeted fiscal support measures that could distort markets and erode fiscal buffers. Instead, they should focus on rapid, temporary support targeted to the most vulnerable households.”
The report’s special focus finds that oil-price volatility during periods of rising geopolitical risk is roughly twice as high as during calmer periods, with a geopolitically driven 1percent decline in oil production pushing prices up by an average of 11.5 percent. Critically, these effects spill over into other key commodity markets, with an impact roughly 50 percent larger than under normal market conditions. According to the report, a 10 percent oil price increase triggered by a geopolitical supply shock leads to natural gas price increases peaking at about 7 percent and fertiliser price increases peaking at over 5 percent. These peaks typically occur about a year after the initial oil price shock, with adverse consequences for food security and poverty reduction.
