The World Bank stated on Monday that the recent escalation of conflict in the Middle East could cause a “dual shock” in global commodity markets.
The latest edition of the World Bank’s Commodity Markets Outlook indicated that “the latest conflict in the Middle East, which comes on top of disruptions caused by the Russian invasion of Ukraine, could push global commodity markets into uncharted waters.”
This situation might create a significant shock to global oil prices, despite that the global economy is in a much better position than it was during the 1970s (during the 1973 oil crisis) to face such a significant shock in oil prices, according to the report.
The World Bank provided an initial assessment of the potential short-term implications of this conflict on global commodity markets, emphasizing the need to contain the impact within limits and prevent it from expanding.
Based on baseline projections made by the World Bank, it is anticipated that the average oil price will reach $90 per barrel in the current quarter before decreasing to an average of $81 per barrel next year as the pace of global economic growth slows down.
The report forecasts a general 4.1% decrease in global commodity prices in the upcoming year. Additionally, it anticipates a drop in agricultural commodity prices with increasing supplies.
Furthermore, it predicts a 5% decrease in basic metal prices by 2024, while primary commodity prices are expected to stabilize in 2025.
The prospects for commodity prices will quickly turn negative if there is an escalation in the conflict, according to the report.
For the past 25 days, the Israeli military has conducted intensive airstrikes on residential areas in Gaza, resulting in the deaths of 8,306 Palestinians, including 3,457 children and 2,136 women, according to the Palestinian Ministry of Health.
In the West Bank, 122 Palestinians have been killed since October 7. Additionally, the Israeli military has carried out a widespread campaign of arrests, affecting approximately 2,000 Palestinians, according to official Palestinian sources.