World Bank Warns of Rising Inflation as Energy Costs Surge

Global energy prices are set to rise sharply this year as tensions in the Middle East continue to disrupt supply chains and unsettle commodity markets worldwide. A new report by the World Bank says energy prices could increase by 24% in 2026, pushing overall commodity prices up by 16%.

The report links the surge to attacks on key energy infrastructure and disruptions along major shipping routes, especially the Strait of Hormuz. The waterway handles about 35% of global seaborne crude oil trade. These disruptions have caused what analysts describe as a major oil supply shock, with global supply dropping by around 10 million barrels per day at the peak of the crisis.

Although prices have eased slightly in recent weeks, Brent crude remains more than 50% higher than at the start of the year. The benchmark is expected to average $86 per barrel in 2026, up from $69 in 2025.

The impact is spreading beyond energy. Fertiliser prices are projected to rise by 31%, driven by a sharp increase in urea costs. This could affect farmers and reduce food production. The World Food Programme warns that up to 45 million more people could face acute food insecurity if the conflict continues.

Global inflation is also expected to rise. Developing economies could see inflation average 5.1% in 2026, while growth slows to about 3.6%. Countries that rely on imports are likely to be hardest hit.

World Bank Chief Economist Indermit Gill said the effects of the war will come in stages.

“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,” he said.

He warned that poorer households will suffer most because they spend more on food and fuel.

Experts say the situation could worsen if the conflict drags on. Oil prices could rise to as high as $115 per barrel, with further pressure on food and energy markets.

Governments have been urged to offer targeted support to vulnerable groups instead of broad spending that could weaken public finances.