Oil, Fertiliser Prices to Hit 4-year High Over Iran War – World Bank

Global oil and fertiliser prices are set to climb to their highest levels in four years as escalating conflict involving Iran continues to rattle commodity markets, the World Bank Group has said in its latest Commodity Markets Outlook.

The World Bank on Tuesday warned that energy prices could surge by 24 per cent this year, marking their highest level since the disruption triggered by the Russia’s invasion of Ukraine.

Overall commodity prices are projected to rise by 16 per cent in 2026, driven largely by sharp increases in energy and fertiliser costs, alongside record highs in several key metals.

According to the report, the shock emanating from the Middle East conflict is already reverberating across global supply chains, with significant implications for economic growth, job creation and development, particularly in emerging markets.

Central to the disruption is the Strait of Hormuz, a critical shipping route that accounts for roughly 35 per cent of global seaborne crude oil trade.

Attacks on energy infrastructure and shipping bottlenecks in the corridor have triggered what the World Bank described as the largest oil supply shock on record, cutting global supply by about 10 million barrels per day at the peak of the disruption.

Although prices have eased slightly from recent highs, Brent crude remained more than 50 per cent higher in mid-April compared to levels at the start of the year.

The Bank projects that Brent will average $86 per barrel in 2026, up from $69 in 2025, assuming that the most severe disruptions subside in the coming months and maritime flows gradually normalise.

Chief Economist of the World Bank, Indermit Gill, cautioned that the crisis is unfolding in layers, with far-reaching consequences. “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

“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”, he said.

Fertiliser prices are expected to jump by 31 per cent in 2026, underpinned by a 60 per cent surge in urea prices. This is projected to push fertiliser affordability to its weakest level since 2022, squeezing farmers’ margins and threatening agricultural output.

The report warned that prolonged conflict could exacerbate global food insecurity, with the World Food Programme estimating that as many as 45 million additional people could be pushed into acute hunger if supply pressures persist.

Beyond agriculture, industrial commodities are also under pressure. Prices of base metals such as aluminium, copper and tin are forecast to hit record highs, reflecting robust demand from sectors including data centres, electric vehicles and renewable energy. Precious metals are also seeing unprecedented gains, with prices projected to rise by 42 per cent in 2026 amid heightened geopolitical uncertainty.

The World Bank further noted that rising commodity prices will intensify inflationary pressures and weaken global growth. Inflation in developing economies is now projected at 5.1 per cent in 2026, up from 4.7 per cent last year and one percentage point higher than earlier estimates. Economic growth in these markets is expected to slow to 3.6 per cent, a downward revision from previous projections.

Countries directly affected by the conflict are likely to bear the brunt of the downturn, while about 70 per cent of commodity-importing nations and over 60 per cent of exporters could see weaker growth than earlier anticipated.

In a worst-case scenario where hostilities escalate further or supply disruptions persist, oil prices could spike to as high as $115 per barrel in 2026. Such an outcome would likely trigger broader price increases across fertiliser and alternative energy markets, pushing inflation in developing economies to as high as 5.8 per cent.

Deputy Chief Economist of the World Bank, Ayhan Kose, urged policymakers to tread cautiously in responding to the unfolding crisis. “The succession of shocks over the decade has sharply reduced the fiscal space available to respond to the current historic energy supply crisis.

“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”, he said.