Commodity Prices Projected to Reach Four-Year High in 2026

Global Commodity Prices to Surge 16% This Year, World Bank Warns

The World Bank Group has projected a significant increase in global commodity prices this year, reaching its highest level since 2022. According to the Washington-based lender's latest Commodity Markets Outlook report, the commodity-price index is expected to climb approximately 16% this year. This marks the first annual increase since Russia's invasion of Ukraine disrupted energy markets and fueled global inflation.

The ongoing war in Iran has had a profound impact on key industrial supplies, including oil and metals. Energy and fertilizer prices have surged to multi-year highs since the conflict began 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, has triggered a historic shock to energy and commodity markets.

The World Bank's energy price gauge is projected to increase by around 24% this year, assuming that the most acute supply disruptions end in May. Brent crude is also expected to average $86 a barrel this year, a significant upward revision from the $60 a barrel estimate made in January.

Read also: Treasury Yields Experience Largest Increase in Two Weeks Following Release of Labor Market Data

The impact of the conflict is not limited to energy markets. Natural gas and fertilizer prices have also seen sharp increases, with fertilizer costs projected to climb 31% this year. This poses a significant risk to farmer incomes and future crop yields, which could eventually filter through to higher food costs and raise food insecurity.

The closure of the Strait of Hormuz 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 $100 a barrel, it could push up to 45 million more people into acute food insecurity this year, according to the World Bank.

Comparison of Energy Price Projections

Read also: US-Iran Tensions Spark Uptick in Oil Prices Amid Global Market Decline

The World Bank's chief economist, Indermit Gill, has warned that the war is having a devastating impact on the global economy. "The war is hitting the global economy in cumulative waves: first through higher energy prices, then higher food prices, and finally, higher inflation," he said. The poorest people, who spend the highest share of their income on food and fuels, will be hit the hardest, Gill added. "All of this is a reminder of a stark truth: war is development in reverse."