In just two months, a historic energy supply shock has upended commodity markets. The outlook for commodity prices and the global economy now depends largely on two factors: the extent of damage to production capacity in the Middle East and the speed and scale of the return of shipping through the Strait of Hormuz. Against this backdrop, this blog addresses five questions about the war’s economic implications.
 

1. How large is the commodity shock from the Middle East war?

The war has caused unprecedented commodity supply disruptions. Before the conflict, vessels transiting the Strait of Hormuz accounted for nearly 35 percent of global seaborne crude oil trade, 20 percent of refined petroleum product trade, and about 20 percent of liquefied natural gas trade (figure 1.A). The shutdown of shipping has triggered the largest energy supply shock on record, with 10 million barrels per day of oil supply lost in March (figure 1.B). The Gulf region is also a major source of fertilizers, aluminum, and many industrial inputs.
 

Figure 1. Commodity market impacts 

Sources: Bloomberg; Fastmarkets; International Energy Agency (IEA); UNCTAD; World Bank.
A. Share of global seaborne trade volume passing through the Strait of Hormuz, except for aluminum which refers to global production share.
B. mb/d = million barrels per day. Oil supply disruptions during geopolitical events as defined by International Energy Agency. The corresponding time periods for each episode include: Strait of Hormuz closure (March 2026), Iranian Revolution (November 1978–April 1979), Arab oil embargo (October 1973–March 1974), Invasion of Kuwait (August 1990–January 1991), Iran-Iraq War (October 1980–January 1981), the early period of the Iraq war (March–December 2003), and the civil war in Libya (February–October 2011).

2. What is the outlook for energy prices?

Since March, prices of key commodities have surged. The price of Brent oil rose from $72 per barrel ($/bbl) at the end of February to $118/bbl at the end of March, the largest monthly increase on record (figure 2.A). Oil prices have since remained volatile, exceeding $126/bbl intraday in late April.

Annual average energy prices are projected to rise by 24 percent this year overall, with Brent oil averaging $86/bbl, up from $69/bbl in 2025. This forecast assumes the most acute disruptions will end in May, that exports through the Strait of Hormuz will return to near prewar levels by October, and that damage to energy production capacity will remain limited.

European natural gas prices are forecast to jump 25 percent, with Asian liquefied natural gas (LNG) and coal prices also rising sharply. Relative to expectations in January, the projections represent a shock of almost 40 percent to energy prices this year (figure 2.B).

Figure 2. Energy market impacts

Sources: Bloomberg; World Bank.
A. bbl = barrel. Bars show dollar difference in the end-of-month daily price of brent compared to the previous month’s value. Top 10 positive changes since 1988 are plotted.
B. Price forecast revisions compared to the January 2026 edition of the Global Economic Prospects report.

3. What could happen to energy prices if disruptions persist?

Energy production and trade disruptions could prove more extensive and persistent than assumed in the baseline. Renewed conflict could delay a sustained reopening of the Strait of Hormuz beyond mid-2026. Shipping constraints could then slow the resumption of exports through late 2026 or early 2027. Under such circumstances, Brent oil prices could average $95 to $115/bbl in 2026 (figure 3.A).

Oil supply buffers and alternatives will be critical to stabilize markets. Strategic reserve releases, sanctioned oil in transit, alternative Gulf export routes, and biofuels could partly offset a shutdown for several months (figure 3.B). Residual flows through the Strait would also reduce the supply gap, but ongoing disruptions will erode stocks rapidly, as seen in recent weeks. Constraints on alternative pipeline substitution in the Middle East represent a major risk.
 

Figure 3. Risks of more extensive disruptions

Sources: Consensus Economics; International Energy Agency (IEA); U.S. Energy Information Administration (EIA); World Bank.
A. bbl = barrel. Dashed line indicates World Bank Group forecast for 2026. Yellow area indicates the range for the World Bank’s forecast in case of more extensive conflict-related disruptions. Grey area indicates the 10th-90th percentile range of private-sector oil price forecasts included in the March 2026 Consensus Forecasts release.
B. Data are from IEA’s Oil Market Report, March and April 2026 editions. To translate oil stocks into possible flows, sanctioned oil on water and IEA member countries’ reserves are assumed to be released to the market over a period of four months. Figure depicts plausible time-limited alternatives to oil via the Strait of Hormuz and is not a forecast.

 

4. How will the war-related disruptions affect other commodities?

The Middle East is a major fertilizer exporter, meaning trade disruptions are squeezing fertilizer supplies. War-related supply reductions for LNG and fertilizer feedstocks are also raising fertilizer production costs. Average fertilizer prices are projected to jump by more than 30 percent in 2026, driven by a 60 percent leap in urea prices.

Even so, food commodity prices are expected to rise only 2 percent this year, reflecting ample global grain production. Soaring fertilizer prices will therefore worsen fertilizer affordability for farmers, as happened in 2022 (figure 4.A). The food price forecast depends on conflict-related disruptions easing soon. If greater disruptions drive fertilizer and other input costs even higher, knock-on impacts on food prices could push tens of millions more people into acute food insecurity globally.

Base metals prices are also set to rise sharply this year, by 19 percent, as demand from emerging sectors adds to traditional uses. In addition, the war is raising input costs for metals mining and refining worldwide. Precious metals prices continue to set records, with average prices forecast to climb 42 percent in 2026, boosted by geopolitical uncertainty. Gold and silver prices are projected to be nearly four times their 2015–19 averages (figure 4.B).

Figure 4. Fertilizer and metals market impacts

B. Precious metals price forecasts for 2026

2026 April forecasts

2026 January forecasts

Consensus range

US$/toz

US$/toz

Sources: Consensus Economics; World Bank.
A. Fertilizer affordability index defined as fertilizer index divided by food price index. “Pre-conflict baseline” dashed line refers to the commodity price forecasts for the January 2026 edition of the Global Economic Prospects report.
B. RHS = right-hand scale; toz = troy ounce. Blue bars show the World Bank Group’s baseline forecast for 2026. Red markers show January 2026 forecasts. Whiskers indicate the 10th-90th percentile range of private sector price forecasts, based on the March 2026 Consensus Forecasts release.

5. What will higher commodity prices mean for inflation and economic growth?

The war is weakening economic growth prospects around the world. Emerging market and developing economies (EMDEs) are projected to grow 3.6 percent in 2026—a 0.4 percentage point downgrade since January (figure 5.A). EMDE commodity exporters are expected to grow just 2.4 percent, a 0.9 percentage point downward revision, mainly reflecting setbacks to economies directly impacted by hostilities. Growth in EMDE commodity importers has been revised lower by 0.2 percentage point, to 4.2 percent, with downgrades in 70 percent of these economies.

Amid a large energy price shock, higher inflation is accompanying weaker growth. Consumer price inflation in EMDEs, previously forecast at 4.1 percent in 2026, is now projected to rise to 5.1 percent in the baseline (figure 5.B). If more extensive disruptions push average Brent oil prices to $115/bbl this year, EMDE inflation could reach 5.8 percent—the highest rate since 2013, aside from 2022.

Figure 5. Growth and inflation impacts in emerging market and developing economies (EMDEs)

A. Growth forecasts for EMDEs, commodity exporters, and commodity importers

January 2026

Percent

Sources: Oxford Economics; World Bank.
A. Aggregate growth rates are calculated using GDP weights at average 2010-19 prices and market exchange rates. January 2026 refers to growth rates reported in the January 2026 Global Economic Prospects report. Data for 2025 are estimates and for 2026 are forecasts.
B. Model-based projections of GDP-weighted consumer price index (CPI) inflation in emerging market and developing economies under different oil price forecasts. For the conflict-related disruptions range, average Brent oil prices in 2026 span from $95/bbl to $115/bbl.

 

Policy responses

As many governments have limited fiscal space, domestic policy responses should be timely, temporary, targeted, and funded within existing plans. International institutions can also assist countries to navigate the disruptions, working with domestic policy makers and the private sector to bring together information-sharing, policy expertise, technical innovation, and financial assistance.

The World Bank Group is supporting EMDEs through a three-part plan combining immediate assistance with longer-term development. First, it is helping countries access liquidity quickly through contingent financing, existing project balances, and fast-disbursing instruments. This can protect vulnerable households, meet urgent fiscal needs, support firms, and reduce financial sector risks. Second, if necessary, the institution will reprioritize pipeline resources toward the crisis response. Third, if crisis conditions persist, it will scale up the response through new financing, guarantees, and private sector support.

Ultimately, this historic shock is likely to reshape energy strategies. Energy importers are likely to strengthen energy security by expanding domestic production and accelerating the deployment of increasingly cost-competitive renewables. Commodity exporters could step up investment to bypass vulnerable bottlenecks. The result may be a lasting reordering of commodity trade, production, and policy priorities.

Source : World Bank