Quick Bites | Global Commodity Outlook

The war in the Middle East may be subject to a fragile ceasefire, but the economic consequences rage on. Fifty per cent of the world’s seaborne trade in sulphur passes through the Strait of Hormuz. So does 34% of trade in crude oil, 29% of liquefied petroleum gas, 19% of liquefied natural gas, 19% of refined oil products, 13% of chemicals, including fertilisers, and nearly 10% of aluminium. This is a chokepoint of the world economy.

Source: Financial Times

The World Bank’s Commodity Markets Outlook, published a couple of days ago, presents a detailed picture of the most important global outcome, namely its impact on supplies of all the commodities listed above, and much else besides.

Here are some of its conclusions below, with accompanying charts.

The outbreak of war in the Middle East represents a historic shock to commodity markets, resulting in March in the largest oil supply loss on record. Assuming the most acute phase of commodity trade disruptions ends in May, with shipping volumes transiting through the Strait of Hormuz gradually returning to near prewar levels by October, average commodity prices are projected to rise by 16% this year—the first annual increase since 2022. This would leave prices about 25% higher than expected in January 2026.

Source: World Bank, Commodity Markets Outlook

This baseline projection hinges on developments in energy markets. With both oil and natural gas prices having soared due to supply shortfalls, average energy prices are forecast to increase by 24% in 2026. The Brent oil price is expected to average $86 per barrel this year, an upward revision of $26 since January. However, the supply shocks brought about by the war and its consequences are widespread, affecting many commodities and industrial inputs. Inflationary pressures follow, limiting the scope for Central Banks to cut interest rates.

Source: FT

Source; World Bank, Commodity Markets Outlook

Prices for crop fertilizers are expected to soar this year due to export disruptions and surging production costs, with input costs also exerting upward pressure on prices of food commodities and metals.

Average base metals prices are projected to reach an all-time high, as are prices of precious metals, amid extraordinary volatility. Under the baseline assumptions, the rise in energy prices this year is set to slow growth in emerging market and developing economies and drive their average inflation rate to a four-year high. Australia’s inflation rate (headline CPI) is now 4.6%, well outside the 2-3% target band.

Source: World Bank, Commodity Markets Outlook

Risks to the commodity price projections are tilted firmly toward higher prices. If disruptions in the Middle East prove more protracted or severe than assumed, the Brent oil price in 2026 could average $95 to $115 per barrel, with other commodity prices also far exceeding forecasts. In addition, base metals prices could increase more than anticipated amid inflexible supplies and resilient demand.

Source: World Bank