Energy prices are anticipated to surge 24% in 2026, the largest jump since the Russian invasion of Ukraine in 2022, as a result of the Iran conflict, the World Bank predicted in the latest Commodity Markets Outlook published on Tuesday.
The continued closure of the Strait of Hormuz is anticipated to affect global commodity markets, with prices forecasted to inflate 16%. These increases were predicted based on the soaring cost of energy, fertilizers, and several key metals.
The 60% rise in urea costs will drive fertilizer costs up by 31%, the World Bank predicted, mirroring similar warnings from the United Nations. Approximately half the world’s urea supply and almost a third of ammonia typically flow through the Strait of Hormuz, which has forced many suppliers to find safer alternative routes, despite the burdening cost.
The UN experts in mid-April pressed that higher oil prices, driven by the imbalance of supply and demand, would incentivize farmers to divert maize, sugar, and oilseeds toward biofuel production, potentially creating an issue with food supply. The World Food Programme warned that if these conditions are prolonged, an estimated 45 million people could be pushed into a state of food insecurity.
In developing economies, inflation is now projected to average 5.1% in 2026, 1% higher than was predicted before the launch of Operation Roaring Lion and an increase from 4.7% last year.
Economies directly impacted by conflict will be hardest hit, the World Bank warned, and 70% of commodity importers and more than 60% of commodity exporters worldwide could see weaker growth than was earlier expected.
Largest oil supply shock on record
The blockades on Hormuz have led to the largest oil supply shock on record, reducing international supply by 10 million barrels daily.
Brent oil is forecast to average $86 a barrel in 2026, a significant increase from the $69 per barrel cost in 2025. Should the Islamic regime continue attacking critical oil and gas facilities, the price could reach a high of $115.
The disrupted balance of supply and demand is what led the United Arab Emirates to announce on Tuesday that it would withdraw from OPEC, and OPEC+, according to the country’s energy minister.
The dire forecast is based on predictions that most acute disruptions will end in May and Hormuz will recover to pre-war shipping levels by the end of 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.”
The electric vehicle and renewable energy markets will also not be spared from the inflating costs, the World Bank warned. The price of base metals, including aluminum, tin, and copper, is expected to reach all-time highs.
“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.”