The war in the Middle East, the latest in a series of major shocks to the global economy following COVID-19 and Russia’s invasion of Ukraine, could have significant macroeconomic repercussions.
Global commodity prices are projected to rise by 16 percent this year—the first annual increase since 2022—leaving them about 25 percent higher than anticipated in January 2026. This baseline outlook hinges on continued supply disruptions in the Middle East, particularly in energy and fertilizer markets, with prices expected to increase by 24 percent and 31 percent, respectively, in 2026. Metals and minerals prices are projected to rise by 17 percent in 2026, supported by strong demand, while precious metals prices are expected to surge by 42 percent to record highs. In contrast, agricultural commodity prices are projected to decline by 6 percent in 2026, as falling beverage prices more than offset gains in food prices.
Commodity prices were highly volatile in the first quarter of 2026, driven by supply disruption concerns amid geopolitical tensions in the Middle East. Energy prices were particularly affected, with the price of Brent crude rising sharply from $72 a barrel at the end of February—already reflecting a significant geopolitical risk premium—to $118 a barrel by the end of March, marking the largest monthly increase on record. Following a sharp drop in exports from the Middle East, competition to secure LNG intensified, pushing prices higher in both Asia and Europe. The Asian LNG benchmark surged by 94 percent over the course of March, while European natural gas prices increased by 59 percent. Despite the war roiling many markets, the World Bank Group’s agricultural commodity price index remained broadly stable in the first few months of 2026. Higher food prices were offset in the first quarter of 2026 by a sharp decline in beverage prices, as past supply crunches for cocoa and coffee continued to unwind. Meanwhile, the metals and minerals price index remained elevated, reflecting tight markets for base metals, strong industrial demand, and inelastic short-term production.
After rising 20 percent in the first two months of 2026, Brent crude climbed above $100 a barrel in mid-March, driven by severe disruptions to oil shipments through the Strait of Hormuz and attacks on regional energy infrastructure. Prices partly stabilized amid temporary sanctions relief for exports from Iran, Russia, and Venezuela, as well as the release of 400 million barrels from the International Energy Agency’s emergency reserves. Still, by end-March, Brent had surged about 65 percent ($46 a barrel)—its largest monthly increase on record. Prices eased following a ceasefire announcement in early April but remained more than 50 percent above their levels at the start of the year. For context, Brent averaged just under $64 a barrel in the fourth quarter of 2025, its lowest quarterly level in over four years.
Looking ahead, Brent is expected to average $86 a barrel in 2026 and $70 a barrel in 2027. This projection assumes that the most acute phase of supply disruptions related to the conflict in the Middle East ends within the second quarter of 2026. It also assumes that oil exports from the Middle East will recover following the peak disruptions, stabilizing around pre-war levels by the end of the year. Risks remain tilted to the upside, particularly if supply disruptions prove more severe or prolonged, while downside risks include faster adoption of electric vehicles, weaker global growth, and higher-than-expected supply—especially in 2027.
Natural gas prices surged in early 2026, driven by supply disruptions and intensified competition for LNG amid geopolitical tensions in the Middle East. Prior to the outbreak of the war, natural gas prices had already risen due to unusually cold winter temperatures in both Europe and the United States, which boosted demand and disrupted LNG exports from U.S. terminals. Following the conflict, sharp declines in LNG exports tightened global markets, pushing prices higher across both Asia and Europe. The U.S. benchmark is expected to increase by 8 percent in 2026, supported by higher LNG exports, and by 5 percent in 2027. European natural gas prices are projected to surge by about 25 percent in 2026, driven by LNG supply disruptions in the Middle East and damage to facilities in Qatar, which are tightening global LNG markets and intensifying competition for cargoes as inventories are rebuilt. In 2027, European prices are expected to decline by 20 percent as supply conditions normalize.
The agriculture price index has remained broadly stable over the past three quarters, averaging about 7 percent lower in the first quarter of 2026 than a year earlier. Gains in grains and oilseeds were offset by sharp declines in beverage prices. Thus far, the effects of the Middle East conflict on food commodity markets have been more limited than at the start of Russia’s invasion of Ukraine in 2022, when disruptions to major exporters of grains and oilseeds triggered an immediate surge in food prices. Still, higher transport costs from elevated oil prices and reduced fertilizer use could raise domestic food inflation and worsen food insecurity in vulnerable settings.
The agriculture price index is projected to fall by 6 percent in 2026, as a steep drop in beverage prices (−30 percent) more than offsets a modest increase in food prices (2 percent), while raw material prices remain broadly unchanged. In 2027, agricultural prices are expected to stabilize as the beverage price correction runs its course and small declines in raw materials are balanced by gains in food prices. Risks are tilted to the upside. A more prolonged or intense conflict in the Middle East, extreme weather—including a potentially strong El Niño—or stronger biofuel demand could push food prices higher than projected.
The World Bank Group’s fertilizer price index rose by more than 12 percent in the first quarter of 2026, marking the sixth increase over the past seven quarters. On a monthly basis, prices in March 2026 reached their highest level since 2022. The surge in the index largely reflects the impact of the closure of the Strait of Hormuz on exports of fertilizers and inputs. Price increases have been most pronounced for urea, with more moderate gains for other fertilizer types.
The index is projected to increase by more than 30 percent in 2026, supported by higher input costs—particularly for nitrogen- and phosphate-based fertilizers—and resilient demand. The increase, however, remains well below the sharp spikes of 2021 and 2022 of over 100 and 55 percent, respectively, which were driven by export disruptions in Russia and Belarus alongside elevated input costs, especially for natural gas in Europe and Asian LNG. Prices are expected to ease in 2027 as exports recover and additional global supplies come online. Nonetheless, risks to the price outlook remain tilted to the upside, including the possibility of higher-than-expected energy prices and further production and trade disruptions associated with prolonged constraints on shipping through the Strait of Hormuz, as well as undetermined damage to production and export facilities of all related materials.
The World Bank Groups metal and mineral price index rose 13 percent in the first quarter of 2026 and extended its gains in April, driven by mounting supply concerns, including those linked to the conflict in the Middle East. The impact of the conflict has been most pronounced for aluminum, given the region’s key role in global supply, with prices projected to increase by about 22 percent in 2026. Together with strong gains in copper, this is expected to lift the price index by 17 percent in 2026, pushing it to a record high. The outlook reflects tight supplies, especially for aluminum and copper, alongside robust demand from emerging industries in addition to traditional uses. Prices are expected to ease by 7 percent in 2027 as supply conditions normalize. However, risks remain skewed to the upside, including stronger-than-expected data center construction, prolonged supply disruptions (partly related to the Middle East conflict), and new trade restrictions. On the downside, weaker-than-expected global growth, particularly in China, could weigh on demand.
Precious metal prices surged at the beginning of the year, amid heightened geopolitical tensions and strong speculative and safe-haven demand. Gold, platinum, and silver reached record high levels during the first quarter of 2026 and are expected to reach all time annual highs in 2026. The World Bank Group’s precious metals price index is projected to surge by 42 percent in 2026, followed by an anticipated decline of 8 percent in 2027. Escalating geopolitical tensions, heightened policy uncertainty, or increased financial market volatility could drive prices above the current baseline outlook. Conversely, weakened industrial activity in leading economies may reduce demand for silver and platinum, resulting in prices that fall short of forecasts.
The war in the Middle East, the latest in a series of major shocks to the global economy following COVID-19 and Russia’s invasion of Ukraine, could have significant macroeconomic repercussions. Prior to the conflict, Emerging Market and Developing Economies (EMDEs) were expected to grow by 4 percent in 2026; forecasts have since been revised down to 3.6 percent. Inflation is also likely to rise. Before the recent price shocks, GDP-weighted inflation in EMDEs was projected to ease to 4.1 percent in 2026; it is now expected to average 5.1 percent. Food insecurity may worsen as well. Early estimates by the World Food Programme suggest that if oil prices remain above $100 per barrel for an extended period, up to 45 million additional people could face acute food insecurity.
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