World Bank "Energy Prices Expected to Soar 24% This Year Due to Iran War"

World Bank

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

The WB made this forecast, citing its latest commodity market outlook report, and predicted that energy prices this year would reach their highest level since Russia's invasion of Ukraine in 2022.

In addition, with soaring energy and fertilizer prices and major metal prices hitting record highs, overall commodity prices are expected 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 global seaborne crude oil trade, have caused the largest ever crude oil supply shock."

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

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

The WB stated, "This is based on the assumption that the most severe disruptions will end in May and seaborne transport through the Strait of Hormuz will gradually return to pre-war levels by the end of this year."

Indermit Gill, WB Chief Economist, said that the Iran war would hit the global economy "first through rising energy prices, then through rising food prices, and finally through high inflation," adding, "This will cause interest rates to rise, increasing the burden of debt repayment."

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

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

Prices of non-ferrous metals, including aluminum, copper, and tin, are also expected to reach record highs, reflecting strong demand from related industries, including data centers, electric vehicles, and renewable energy, the WB predicted.

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

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

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