{"id":408728,"date":"2026-05-02T18:32:23","date_gmt":"2026-05-02T18:32:23","guid":{"rendered":"https:\/\/www.newsbeep.com\/nz\/408728\/"},"modified":"2026-05-02T18:32:23","modified_gmt":"2026-05-02T18:32:23","slug":"world-bank-details-iran-war-global-commodity-shock","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/nz\/408728\/","title":{"rendered":"World Bank details Iran war global commodity shock"},"content":{"rendered":"

Late last month, the World Bank issued a report on the impact of the war on Iran detailing its inflationary effects and the hit to global growth, which is fast travelling beyond oil and gas to impact food, industrial metals and chemicals, plastics, fertilisers and many other basic commodities.<\/p>\n

Some figures give an indication of the reverberations from the ongoing closure of the Strait of Hormuz.<\/p>\n

According to the Financial Times, 50 percent of the world\u2019s seaborne trade in sulphur passes through the waterway, along with 34 percent of the trade in crude oil, 29 percent of liquified petroleum gas, 19 percent of liquified natural gas, 19 percent of refined oil products, 13 percent of chemicals, including fertilisers, and 10 percent of aluminium.<\/p>\n

Overall, the bank estimates that its energy price index will increase by 24 percent this year\u2014a shock of almost 40 percent relative to what was expected in January.<\/p>\n

But this \u201cbaseline projection,\u201d for oil and gas as well as for other commodities, rests on the assumption that \u201cthe most acute phase of supply disruptions\u201d will start ending in May. That seems increasingly unlikely, with the price of oil rising again at the end of April, hitting over $120 a barrel at one point.<\/p>\n

Chief economist and vice-president of the World Bank, Indermit Gill [Photo: The World Bank]<\/p>\n

Speaking on the report\u2019s results, World Bank chief economist Indermit Gill said economic growth had been \u201cdampened materially.\u201d<\/p>\n

\u201cThe war is hitting the global economy in cumulative waves: first through higher energy prices, then higher food prices and finally higher inflation, which will push up interest rates and make debt even more expensive,\u201d he said.<\/p>\n

The price increases go across the range of vital agricultural and industrial commodities. The bank\u2019s fertiliser index surged to a post-2022 high in March, the second highest jump in the past decade, mainly driven by a 50 percent rise in the price of urea, \u201cwhich is at the epicentre of the halt in seaborne exports from the Middle East.\u201d<\/p>\n

Even before the war, the report noted, the market for base metals had been tight.<\/p>\n

<\/a><\/p>\n

\u201cThe war has since exacerbated supply challenges for base metals, either by impeding production and shipments directly, such as for aluminium, or by curtailing the supply of essential production inputs such as sulphuric acid.\u201d Aluminium prices have risen by 10 percent, the second largest rise in a decade.<\/p>\n

\u201cPrices for aluminium, copper, and tin\u2014essential materials for many products \u2026 are expected to reach all-time highs, marking a third consecutive year of rising prices.\u201d<\/p>\n

While the bank made its predictions according to its baseline assumptions, in some cases predicting a fall in prices in 2027 as conditions somewhat normalised, it was not very confident of them.<\/p>\n

\u201cRisks to the commodity price projections are markedly tilted toward higher prices,\u201d it said. \u201cMost prominently, the severity and duration of commodity supply disruptions in the Middle East could be greater than assumed.\u201d<\/p>\n

Central banks have not yet responded to the surge in inflation by increasing their interest rates, but they are set to do so. The US Federal Reserve meeting earlier this week saw three dissents from the majority decision. That was not because they disagreed with the decision to keep rates on hold but because they wanted language which indicated a bias toward lowering rates to be removed from the Fed\u2019s statement on monetary policy.<\/p>\n

The European Central Bank has also held rates steady, but with a surge in inflation to 3 percent last month, it could change course.<\/p>\n

The World Bank noted that an unforeseen tightening of financial conditions could curb credit growth and business investments, and combined with resurgent trade tensions and policy uncertainty, this could broadly weaken demand. That is, while it did not use the word, it pointed to a situation of global stagflation.<\/p>\n

The continuation of high oil prices will have disastrous consequences for the populations of poorer countries.<\/p>\n

\u201cEstimates suggest that an extended conflict keeping oil prices above $100 [a barrel] could push up to 45 million more people into acute food insecurity this year,\u201d the bank said.<\/p>\n

<\/a><\/p>\n

The report warned that rising fertiliser prices this year would lead to a decline in their use because farmers could not afford the increased costs, leading to reduced crop yields in future growing seasons.<\/p>\n

An even sharper warning on the crisis in energy markets has come from the London-based Economist magazine. In an article last month headlined \u201cGlobal energy markets are on the verge of a disaster,\u201d it reported that what it termed a \u201ccomforting picture\u201d in Western countries\u2014where people were still able to drive, trucks were continuing to operate, and planes were still flying\u2014was \u201cdeeply misleading.\u201d<\/p>\n

Constructing what it called a dashboard of indicators to show how close the world is to an \u201cenergy catastrophe,\u201d the magazine suggested that \u201cgrave damage has already been done.\u201d<\/p>\n

\u201cWorse, without a reopening, costs could soar, triggering events that cause the fuel system to seize up. A reopening of the strait now would\u2014just\u2014avoid a complete disaster. But some additional pain is already inevitable.\u201d<\/p>\n

Three factors were pushing the world towards the cliff edge, the Economist said.<\/p>\n

\u201cOil cargoes available to buy are drying up [because the ships that left the Gulf before the war have now arrived.] Refineries are slashing the output of fuel. And demand remains artificially high, especially in Europe. Something big must give somewhere for energy markets to balance.\u201d<\/p>\n

Asia, dependent on the passage of tankers through the strait for much of its supplies, has been hard hit, with inventories running out. Korea is tapering its releases from strategic reserves and Japan\u2019s are expected to be exhausted this month, the Economist reported.<\/p>\n

The article cited an estimate from the trading firm Trafigura, which said there will be a cumulative loss of 1.5 billion barrels of Gulf oil, 5 percent of annual global output, and that it could easily double.<\/p>\n

\u201cThe last time oil demand fell by 10 percent in short order was during the COVID-19 lockdown of 2020, a shock that also brought about a fall in world gross domestic product. The time to avoid a similar tumble is running out,\u201d the article concluded.<\/p>\n

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