The World Bank's latest Commodity Markets Outlook warns that the Iran war and the blockade of the Strait of Hormuz could trigger a 24% surge in energy prices this year. This projected increase represents the most significant energy price spike since Russia's invasion of Ukraine in 2022, threatening to entrench high inflation and stall economic progress in developing nations.
Global commodity markets are facing their most volatile period in four years, with energy and fertilizer prices expected to lead a broad 16% rise in overall commodity costs during 2026. The regional instability has already resulted in the largest oil supply disruption on record, with global production falling by over 10 million barrels per day.
Analysts suggest the current turmoil has reversed the downward trend in commodity prices, creating an environment of stagflation that complicates central bank policy. Ayhan Kose, World Bank deputy chief economist, urged governments to focus on temporary aid for vulnerable households rather than broad fiscal support.
The Strait of Hormuz, which handles approximately 20% of the world’s seaborne crude oil trade, has seen a near halt in traffic. Brent crude oil is now forecast to average $86 a barrel throughout 2026, a sharp increase from the $69 average in 2025.
If the conflict proves more protracted or spreads, the pressure on prices will intensify. The European Union has already spent over €27 billion in additional costs for fossil fuel imports since the Iran war began, with the IEA calling the situation the biggest energy security threat in history.
The IMF has cut its global growth forecast for 2026 to 3.1% and warned of a severe scenario where growth could plummet to 2% if energy volatility persists. Geopolitical risk significantly impacts market stability; a 1% decline in global oil production typically pushes prices up by 11.5%.