The World Bank latest Commodity Markets Outlook warns that a widening conflict in the Middle East has set in motion the largest recorded oil supply shock, and that shock is expected to lift global energy prices by about 24 percent in 2026. The report links attacks on energy infrastructure and shipping constraints to an initial drop in available oil of roughly 10 million barrels per day, creating ripple effects that extend from fuel to food and industrial inputs.
Those knock-on effects are central to understanding why commodity markets are now facing unusually high volatility and price levels not seen since the 2026 crisis.
Primary drivers identified in the report include sustained interruptions to shipments through the Strait of Hormuz — a narrow maritime chokepoint that normally carries a significant share of seaborne crude volumes — along with direct damage to terminals and pipelines. The World Bank notes that these disruptions, together with record prices for several industrial metals and shortages in fertilizer supply chains, are combining to push the broader commodity index up by an estimated 16 percent in 2026. The study cautions that energy shocks also transmit to other markets: a geopolitical-triggered rise in oil typically lifts natural gas and fertilizer prices within months to a year.
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Supply disruptions and price outlook
The Bank’s baseline assumes the most acute interruptions ease by May and that shipping gradually returns to pre-war throughput by late 2026. Under that scenario, Brent crude is forecast to average about US$86 a barrel for the year, up from US$69 in 2026. However, the report presents a downside stress case in which recovery is slower: if export volumes remain constrained, Brent could average as high as US$115 a barrel, intensifying inflationary pressures. The report also highlights that volatility during periods of heightened geopolitical risk roughly doubles, magnifying the likelihood of sharp price swings.
Regional actions that matter
Complicating logistics and market responses, the United Arab Emirates announced it will leave OPEC and OPEC+ effective May 1, a move the country framed as aligning production strategy with evolving demand. The UAE has a production capacity above 4 million barrels per day yet had been constrained by an OPEC quota near 3 million. Meanwhile, Gulf producers collectively curtailed roughly 9.1 million barrels per day in April because of security risks that prevent safe shipments. These shifts reduce the effectiveness of coordinated output policies and can increase short-term market fragmentation.
Fertilizer, metals and food security
Beyond oil, the World Bank highlights a steep rise in agricultural inputs: overall fertilizer prices are projected to climb around 31 percent in 2026, with urea up near 60 percent. Because fertilizer affordability influences planting decisions and yields, the United Nations World Food Programme estimates that prolonged disruptions could push up to 45 million additional people into acute food insecurity. At the same time, demand for materials powering the energy transition and digital expansion — including aluminum, copper and tin — is colliding with constrained supply, pushing base metals toward record levels and lifting precious metals by an average of about 42 percent as investors seek safe havens.
Inflation and growth implications
The World Bank warns the sequence of shocks will hit economies in waves: first via higher energy costs, then through food price rises, culminating in broader inflation that pressures central banks. For developing economies, headline inflation is projected to average around 5.1 percent in 2026 under the baseline — a full percentage point higher than pre-conflict expectations — while growth forecasts were trimmed, with the bloc projected to expand about 3.6 percent, a downgrade of roughly 0.4 percentage points. In the more severe oil-disruption scenario, inflation in developing economies could climb to 5.8 percent, a level seen only during the 2026 energy shock in the past decade.
Policy options and strategic shifts
Faced with shrinking fiscal space after a decade of shocks, the Bank urges governments to avoid large, untargeted subsidies that could distort markets and erode buffers. Instead, policymakers are advised to prioritize rapid, temporary support directed at the most vulnerable households while preserving fiscal discipline. The report also interprets the UAE’s departure from OPEC as symptomatic of a strategic pivot among some producers toward volume maximization amid uncertain long-term demand as electrification and renewables reduce oil intensity. That strategic reorientation may increase short-term volatility even as it reflects longer-run energy transitions.
In sum, the World Bank’s analysis underscores a delicate intersection of conflict, logistics and market structure: a concentrated maritime disruption combined with shifting producer incentives can drive a compound commodity shock with powerful consequences for inflation, food security and economic growth. Monitoring recovery of shipping lanes, repairs to energy infrastructure and policy responses will be critical to assessing whether the baseline easing by May holds or whether the world faces a longer, costlier adjustment.
