The World Bank reported in its latest commodity markets report, published on Tuesday, that energy prices are expected to rise by 24% this year as a result of the war in Iran and the disruptions caused by the blockade in the Strait of Hormuz. This anticipated increase is considered the most significant since the Russian invasion of Ukraine in 2022, threatening to escalate inflation and hinder economic progress in developing countries.
The report noted that global commodity markets are experiencing one of the most severe periods of volatility in four years, with energy and fertilizer prices expected to drive a general increase of 16% in commodity costs by 2026.
Details of the Event
Regional disruptions have already led to the largest oil supply disruption ever, with global production dropping by more than 10 million barrels per day during the crisis. Although some prices have retreated from their initial peaks, the impacts of attacks on infrastructure and bottlenecks in the Strait of Hormuz will keep energy costs elevated for an extended period.
Analysts pointed out that the current disruptions have reversed the downward trend in commodity prices observed over the past year, creating an environment of stagflation and challenges for central banks in managing interest rates.
Background & Context
Historically, the Strait of Hormuz is a vital maritime corridor, handling about 20% of the world's seaborne crude oil trade. Traffic through this strait has effectively halted during the war, exacerbating the crisis.
According to the World Bank's forecasts, the average price of Brent crude oil is expected to reach $86 throughout 2026, a sharp increase compared to the average of $69 recorded in 2025. This forecast is based on the assumption that the most severe disruptions will begin to ease by May, and shipping volumes will gradually return to pre-war levels by the end of the year.
Impact & Consequences
Reports warn that the continuation of the conflict could exacerbate price pressures. Even under current conditions, the conflict has already had significant effects on other energy sectors. Studies show that fluctuations in the oil market have direct consequences on natural gas and liquefied natural gas prices, as countries seek to secure alternative energy supplies.
The European Union has already spent over €27 billion in additional costs for importing fossil fuels since the war began. The International Energy Agency described the situation as the largest threat to energy security in history.
Regional Significance
These developments directly affect Arab countries, many of which heavily rely on oil revenues. As prices rise, some oil-producing nations may benefit, but at the same time, importing countries will face increasing economic pressures.
In conclusion, the current situation indicates that the global economy may continue to face inflationary pressures for an extended period, necessitating a response from governments and central banks to address these challenges.