World Bank "Energy prices expected to surge 24% this year due to Iran war"

World Bank

The World Bank (WB) on the 28th (local time) predicted that energy prices would surge by 24% this year due to the Iran war.

Citing its latest Commodity Markets Outlook report, the WB made this forecast, predicting that energy prices this year would reach their highest level since Russia's invasion of Ukraine in 2022.

Furthermore, with soaring energy and fertilizer prices and major metal prices hitting record highs, overall commodity prices are projected to rise by 16% this year.

The WB pointed out that "attacks on energy infrastructure and shipping disruptions in the Strait of Hormuz, which accounts for about 35% of the world's seaborne crude oil trade, have caused the largest crude oil supply shock in history."

Due to this, global crude oil supply has decreased by 10 million barrels per day, and Brent crude oil prices in mid-this month have remained more than 50% higher compared to the beginning of the year, according to the WB's analysis.

Brent crude oil prices are projected to surge from $69 per barrel last year to $86 per barrel this year.

The WB stated, "This projection is made under the assumption that the most severe disruptions will end in May and that maritime transport through the Strait of Hormuz will gradually recover to pre-war levels by the end of this year."

Indermit Gill, WB Chief Economist, stated that the Iran war would impact the global economy "first through rising energy prices, then through rising food prices, and finally through high inflation," adding that "this will lead to higher interest rates and increase the burden of debt repayment."

Specifically, fertilizer prices are projected to rise by 31% this year, with urea prices surging by 60%.

Citing the World Food Programme (WFP), the WB predicted that in the event of a prolonged war, up to 45 million more people could face severe food insecurity this year due to pressure on food supply and purchasing power.

The WB also projected that prices for non-ferrous metals, including aluminum, copper, and tin, would hit record highs, reflecting strong demand from related industries such as data centers, electric vehicles, and renewable energy.

Precious metals continue to break price and volatility records, with geopolitical uncertainties driving demand for safe-haven assets, and are expected to rise by 42% this year.

The WB warned, "The rise in commodity prices due to these shocks will exacerbate inflation globally and hinder growth," adding, "If hostilities escalate or supply disruptions from the war last longer than expected, commodity prices could rise further."

Ayhan Kose, WB Deputy Chief Economist, advised, "Due to the shocks over the past decade, the fiscal capacity to respond to the current historic energy supply crisis has sharply diminished." He added, "Governments must resist the temptation of broad and untargeted fiscal support measures that can distort markets and weaken fiscal buffers. Instead, they should focus on providing swift and temporary support to the most vulnerable households."