World Bank Sees Energy Prices Jumping 24% This Year on Iran War Shock

World Bank sees energy prices jumping 24%

Food, metals and fertilizer prices also set to rise

Lender warns of twin hit from inflation and slower growth

The World Bank said energy prices will jump 24% this year as fallout from the war in Iran drives up oil prices and disrupts supplies. The lender warned the shock would intensify inflation pressures and slow global growth.

In a commodities market outlook report released on April 28, the World Bank said overall commodity prices will rise 16% this year. Energy, fertilizer and metals prices are all climbing at once, signaling a broad-based shock.

The report said attacks on energy infrastructure and shipping disruptions in the Strait of Hormuz, which handles about 35% of global seaborne oil trade, have caused the largest oil supply shock on record.

Global oil supply is estimated to have fallen by 10 million barrels a day as a result. Brent crude has held gains of more than 50% since the start of the year, and its average price this year is forecast at $86 a barrel, up from $69 in 2025.

The World Bank said the forecast assumes the most severe disruptions end in May and shipping through the Strait of Hormuz gradually returns to prewar levels by the end of 2026.

The energy shock is unlikely to stop there. Higher crude prices raise logistics and production costs, increasing the likelihood that the impact spreads to food and broader consumer prices.

Indermit Gill, the World Bank's chief economist, said the war in Iran would pressure the global economy "first through higher energy prices, then through higher food prices, and finally through higher inflation." Higher interest rates would follow, he added, increasing debt-servicing burdens.

Rising fertilizer prices were also flagged as a risk. Fertilizer prices are forecast to climb 31% this year on a surge in urea prices. Higher farm input costs could lead to further increases in food prices.

Citing the World Food Programme, the report said as many as 45 million more people could face severe food insecurity this year if the war drags on.

Industrial commodity markets are also under strain. Prices for non-ferrous metals including aluminum, copper and tin are set to reach record highs as demand from data centers, electric vehicles and renewable energy converges.

Precious metals including gold and silver are also rallying. The World Bank said prices are forecast to rise 42% this year as geopolitical instability boosts demand for safe-haven assets.

The World Bank said higher commodity prices caused by these shocks would add to inflation worldwide and weigh on growth. Commodity prices could rise further if hostilities escalate or war-related supply disruptions last longer than expected, it added.

Ayhan Kose, the World Bank's deputy chief economist, said repeated shocks over the past decade have sharply reduced governments' fiscal room to respond to the current historic energy supply crisis. Governments should resist the temptation to deploy broad, non-targeted fiscal support measures that can distort markets and weaken fiscal buffers. Instead, they should focus on swift, temporary support for the most vulnerable households.

Shin Hyun-bo, Hankyung.com reporter greaterfool@hankyung.com