Energy Prices Set to Surge Amid Middle East Conflict

Tashkent, Uzbekistan (UzDaily.com) — The military conflict in the Middle East is expected to trigger the largest surge in energy prices in recent years and have a broad impact on the global economy, according to a new World Bank Group report “Commodity Markets Outlook.”

The forecast suggests that energy prices will rise by 24% in 2026, reaching their highest level since the Russian invasion of Ukraine. Overall, the commodity price index is projected to increase by 16%, driven by higher costs for energy, fertilizers, and key metals.

The main factor behind the increase is the disruption of oil supply due to attacks on infrastructure and shipping interruptions through the Strait of Hormuz, through which about 35% of global seaborne oil trade passes. As a result, global supply has reportedly declined by around 10 million barrels per day. Brent crude oil prices at mid-April exceeded early-year levels by more than 50%. Under the baseline scenario, the average Brent price in 2026 is expected to reach US$86 per barrel, compared with US$69 the previous year.

The report highlights that the effects are cumulative, as higher energy prices gradually spread to food and inflation, increasing borrowing costs and weighing on economic growth. According to World Bank Chief Economist Indermit Gill, the poorest populations and developing economies with high debt burdens will be the most affected.

Additional pressure comes from the fertilizer market, where prices are expected to rise by 31% in 2026, including a 60% jump in urea prices. Reduced fertilizer affordability could negatively impact farmers’ incomes and future harvests. The World Food Programme estimates that up to 45 million people could face acute food insecurity if the conflict persists.

Metal markets are also expected to rise sharply. Prices of aluminum, copper and tin are projected to reach record highs due to strong demand from sectors such as data centers, electric vehicles and renewable energy. Precious metals may increase by an average of 42% amid geopolitical uncertainty as investors turn to safe-haven assets.

Inflationary pressure will be another key consequence. In developing economies, inflation is projected to reach 5.1% in 2026, one percentage point higher than previous expectations. Economic growth in these countries is expected to slow to 3.6%, down 0.4 percentage points from earlier forecasts.

In a more severe scenario involving prolonged supply disruptions, Brent prices could rise to US$115 per barrel. This would further increase energy and fertilizer costs, while inflation in developing economies could reach 5.8%, one of the highest levels in a decade.

World Bank Deputy Chief Economist Ayhan Kose noted that in conditions of limited fiscal space, governments should avoid large-scale untargeted support measures and instead focus on targeted assistance for the most vulnerable groups.

The report also emphasizes that geopolitical risks significantly increase market volatility. A 1% reduction in oil supply leads to an average 11.5% increase in prices, with spillover effects on gas and fertilizers. A 10% rise in oil prices can push gas prices up by up to 7% and fertilizers by more than 5%, ultimately affecting food security and poverty reduction efforts.