World Bank: commodity prices to jump 23pc this year on war shocks

Global commodity prices are on course to jump 23 per cent in 2026, the World Bank said on Wednesday, as energy costs, shipping disruption from the Middle East war, problems with grain shipments in the Black Sea and strong demand for gold push prices up. The forecast comes from the bank’s latest Commodity Markets Outlook, reported by Dawn.

“Commodity markets are being hit by several major shocks at once,” said Ayhan Kose, the bank’s deputy chief economist. “Higher energy costs and trade disruptions are driving up prices across a broad range of commodities, threatening to worsen inflation, food insecurity, and economic growth.”

The numbers

According to the report, which is published twice a year:

• Energy: prices are expected to rise 32 per cent this year, reaching their highest since Russia invaded Ukraine in 2022. Brent crude is forecast to average $92 a barrel for the year, and would be higher still if oil demand were not expected to fall 2.5 per cent, the third-largest drop after the 2020 Covid shock and the 1980 oil crisis.
• Oil supply: global stocks have been run down during the war, and supply is expected to fall 5.2 per cent in 2026, the biggest drop in four decades outside the 2020 recession.
• Food: food commodity prices should rise a little over 10 per cent in 2026 because of grain shipment problems linked to the fighting between Russia and Ukraine in the Black Sea, and by more than 7 per cent in 2027, a cumulative rise of nearly 18 per cent.
• Fertiliser: prices are expected to go up 14 per cent in 2026 on a surge in urea, then return to 2025 levels in 2027.
• Metals: a rise of 25 per cent to a new high, with aluminium, copper and tin all at records on supply disruption and strong demand from renewable energy, electric vehicles and data centres.
• Precious metals: up 40 per cent in 2026, as investors look for safe-haven assets amid geopolitical and policy uncertainty. The bank expects some easing in 2027.

Overall commodity prices should ease by 7 per cent next year.

The risks the bank flags

The bank warned that the outlook could get worse if the conflict in the Middle East escalates and damage to Russian oil infrastructure continues. It said the world economy was more exposed than usual to another supply shock because oil stocks had been depleted.

Weather is another risk. The report refers to forecasts of the worst El Nino since 1950, which could keep food prices high and bring back inflation and tighter monetary policy. In an adverse scenario that combines a record El Nino, more disruption to Black Sea grain, escalation in the Middle East and continued damage to Russian oil facilities, food prices could be 12 per cent higher than expected. That could set off a food crisis like the one in the early 2010s, when more than 40 million additional people were pushed into extreme poverty, the bank said.

Kose said the bank was focused on protecting the world’s poorest people and supporting low-income countries already struggling with heavy debt. It has provided $8.7 billion in low-cost loans and other aid to 25 countries that were hit by the war, according to the report. The report came two days before foreign ministers of the G20 economies were due to meet in Atlanta, where the wars in the Middle East and Ukraine are on the agenda.

What it means for Pakistan

The report does not single out Pakistan, but the pressure points it describes are ones Pakistani households already feel. The IMF raised its forecast for Pakistan’s inflation this fiscal year to 9.9 per cent, as we reported in the IMF’s inflation forecast for Pakistan, and weekly price data show LPG, flour and chicken rising; see our report on the latest weekly inflation reading. Fertiliser and fuel costs feed straight into farm and transport costs.

Why it matters

The forecast of a 7 per cent easing next year may sound reassuring, but it depends on the Middle East war not widening and on the weather behaving. For countries that import most of their fuel, including Pakistan, the real question is how long prices stay high, because a year of costly energy and food strains both household budgets and the import bill. The next things to watch are the outcome of the mediation efforts over Iran and the Hormuz route, and any signs of the El Nino the bank warns about.

This article draws on reporting by Dawn.