Oil & Energy
Energy Prices Surge on War Impact; Inflation Pressures Rise, World Bank Says
Energy prices could jump 24% this year and lift Brent crude to $86 per barrel in 2026 as war-driven supply shocks disrupt markets, the World Bank said Tuesday.The bank expects overall commodity prices to climb 16% in 2026, driven by higher energy and fertilizer costs.Supply losses of about 10 million barrels per day have hit global oil markets after attacks disrupted infrastructure and shipping through the Strait of Hormuz, which handles almost 35% of seaborne crude.Brent crude remained over 50% above early-year levels by mid-April, and the World Bank expects prices to average $86/bbl in 2026 as disruptions ease by May and shipping normalizes by late 2026, it said.Higher energy costs are feeding into food prices and inflation, increasing borrowing costs and placing added pressure on households and developing economies, the World Bank said.Strong demand from data centers, electric vehicles, and renewable energy could lift prices of base metals such as aluminum, copper, and tin to record highs, according to the bank.Inflation in developing economies could reach 5.1% in 2026, rising from 4.7% last year and exceeding earlier forecasts by one percentage point, the report said.The World Bank expects growth in developing economies to slow to 3.6% in 2026, marking a 0.4 percentage point downgrade from January projections, it said.Weaker growth could hit about 70% of commodity importers and more than 60% of exporters, particularly in economies directly exposed to the conflict, the bank said.If supply disruptions persist and infrastructure damage worsens, Brent crude could average as high as $115 per barrel in 2026, the bank added.Under that scenario, inflation in developing economies could rise to 5.8%, reaching its highest level since 2022 and intensifying economic strain, it said.A 1% drop in oil supply can lift prices by 11.5%, while a 10% increase in oil prices can push natural gas up 7%, with peak effects appearing after about a year, the report said."The 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," Indermit Gill, the World Bank Group's Chief Economist, said."The poorest people... will be hit the hardest," he added, noting that the crisis shows "a stark truth: war is development in reverse."Ayhan Kose, the World Bank's Deputy Chief Economist, said governments must avoid broad fiscal support and instead target aid to vulnerable households to protect fiscal stability, warning against measures that could distort markets and weaken fiscal buffers.