Another Surge After Surge: Chilling Warning of Global Economic Impact as War Drags On

"Oil Supply Shock from Hormuz Blockade"
"Fertilizer Price Surge Drives Food Prices Higher"

Reuters Yonhap News

The World Bank (WB) forecast on April 28 (local time) that, due to the aftermath of the Iran war, energy prices will surge by 24% this year and major commodity prices will also rise by more than 16%.

In its April Commodity Markets Outlook report released that day, the WB projected that this year’s energy prices could reach their highest levels since the outbreak of the Ukraine war in 2022, if the blockade of the Strait of Hormuz is prolonged. The WB pointed out that “attacks on energy infrastructure and disruptions to shipping in the Strait of Hormuz, which handles about 35% of the world’s seaborne oil trade, have caused the largest oil supply shock on record.”

With the blockade of the Strait of Hormuz continuing for nearly two months, global oil supply has dropped by more than 10 million barrels per day, and in mid-April, Brent crude prices have remained more than 50% higher compared to the start of the year. The WB forecast that “the average price of Brent crude will soar from $69 per barrel last year to $86 per barrel this year.” It further explained, “This projection assumes that the most severe disruptions will end in May and that maritime transport through the Strait of Hormuz will gradually recover to pre-war levels by the end of this year.”

The WB warned that if the Iran war is prolonged, it could push up not only energy prices but also food prices, delivering a severe inflationary shock to the world. Indermit Gill, Chief Economist at the WB, explained, “First, the global economy is hit through rising energy prices, then through higher food prices, and finally through elevated inflation,” adding, “This will lead to higher interest rates, increasing the burden of debt repayment.”

Following the surge in energy prices, prices of urea—a nitrogen-based fertilizer mainly produced from natural gas—have soared by 60% so far this year, and overall fertilizer prices are expected to rise by 31%. Analysts say that a sharp spike in fertilizer prices will soon have a direct impact on global food prices.

The WB stated, “Inflation in developing countries is expected to average 5.1% in 2026 under the baseline scenario,” noting, “This is up from 4.7% last year and is more than 1 percentage point higher than pre-war forecasts. If the war continues, inflation could soar to 5.8%.”

This content was produced with the assistance of AI translation services.