The World Bank stated on Tuesday that the conflict in the Middle East has triggered a sharp rise in commodity prices, potentially increasing inflation in developing economies and reducing their economic growth rates.

Since the initial attacks by the United States and Israel on Iran in late February, shipping through the Strait of Hormuz has largely stalled, leading to a significant reduction in the global supply of oil, natural gas, urea, and various raw materials.

Due to the supply shortages, commodity prices have surged dramatically. In its Commodity Markets Outlook report, the World Bank indicated that even if the Strait of Hormuz gradually resumes navigation starting next month, the average price of Brent crude for this year is still projected to reach $86 per barrel, significantly higher than the $65 projected for 2025.

With other raw material supplies also disrupted, the Bank forecasts an overall 16% increase in commodity prices this year. This would mark the first annual rise since the 2022 Russia-Ukraine conflict and is 25% higher than the Bank's January forecast.

If the shipping disruptions persist long-term, the annual average price for Brent crude could climb to a range of $95 to $115 per barrel, with other commodities experiencing even larger price increases.

World Bank economists estimate that under a baseline, moderate scenario, the economic growth rate for developing economies this year would be only 3.6%, down from the 4% forecast in January. The average inflation rate is expected to reach 5.1%, one percentage point higher than pre-conflict projections.

Households are forced to spend more on essential goods, reducing consumption available for other goods and services, thereby weakening economic growth. Concurrently, rising inflation may pressure central banks to raise interest rates. Already, the central banks of Pakistan and the Philippines have increased rates to counter new inflationary pressures, with more countries potentially following suit.

The World Bank's Chief Economist stated, "Low-income groups, who spend the highest proportion of their income on food and energy, will bear the brunt of the impact. Developing economies already struggling with high debt burdens will face even greater difficulties. War is, in essence, a reversal of development."

The World Bank predicts that global oil production could decline by 1.5% in 2026, which would be the third-largest annual drop in four decades.

Reviewing data from the past forty years, World Bank research found that supply shocks caused by transnational geopolitical conflicts have a more substantial and prolonged impact on prices compared to routine market fluctuations, such as the exploration and commissioning of new oil fields or production cut agreements by major oil-producing nations.

Calculations show that a 1% decline in oil production resulting from a sharp escalation in geopolitical risk leads to an average 11% increase in international oil prices—a volatility magnitude significantly higher than conclusions from past studies on conventional oil supply shocks.

To avoid high-priced oil and gas, the world will accelerate the search for alternative energy sources, driving up prices for other categories: coal prices are projected to rise by 20%. Furthermore, demand for agricultural products like soybean oil, sugar, and corn may increase as they can be processed into substitutes for gasoline, such as biodiesel and ethanol.

Beyond energy categories, the conflict has severely impacted urea supply. Urea is a core component of fertilizer, and its production is highly dependent on natural gas, which is abundant in the Middle East.

The World Bank expects urea prices to rise 60% this year compared to 2025, subsequently pushing the average price of fertilizers up by 31%.

Global food prices are forecast to increase by 2% in 2026, a smaller rise than in 2022. The difference is that the parties involved in the 2022 conflict were both major global grain exporters. However, a prolonged closure of the Strait of Hormuz could have a more profound and lasting impact on global food prices.