Global commodity prices are set to hit their highest levels since 2022 this year, as the war in Iran continues to disrupt key industrial raw material supplies like oil and metals, the World Bank warned. Bloomberg reports on this.
The World Bank's commodity price index is expected to rise by about 16% this year, according to their latest report on 'Commodity Market Outlook'.
Energy and fertilizer prices have shot up to multi-year highs since the war in Iran kicked off in late February. The actual closure of the Strait of Hormuz, which accounted for about a third of global maritime crude oil trade before the conflict, has sparked a historic shock in the energy and commodity markets, notes the bank.
"The war is hitting the global economy in rolling waves: first through higher energy prices, then through rising food costs, and finally through increased inflation," said Indermit Gill, the chief economist of the World Bank.
According to the baseline forecast, which assumes the end of the 'most acute' supply disruptions in May, the World Bank's energy price index is expected to rise by about 24% this year. Meanwhile, the average price of Brent crude oil this year is projected to be around $86 per barrel compared to the January estimate of $60.
The natural gas and fertilizer markets are also experiencing a sharp spike in prices due to the conflict. According to World Bank forecasts, fertilizer costs are expected to rise by 31% this year, threatening farmers' incomes and future harvests.
Ultimately, this could lead to higher food prices and worsen food security issues. The closure of the strait has blocked key routes for several countries reliant on food imports, while rising fuel and freight costs are pushing up prices for other essential goods. If oil prices remain above $100, it could plunge as many as 45 million people into acute food scarcity this year, warns the bank.