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The World Bank published its Commodity Markets Outlook on April 28 and used language that central banks, trading desks, and development agencies will be parsing for weeks. Chief Economist Indermit Gill called the war’s economic impact “cumulative waves: first through higher energy prices, then higher food prices, and finally, higher inflation.” Overall commodity prices are forecast to rise 16 percent in 2026. Energy alone is up 24 percent. And the baseline assumes the worst is already over. It isn’t.
If you’re running a commodities book right now, the gap between the World Bank’s baseline and what the physical market is telling you is the single most important number on your screen. The CMO forecasts Brent averaging $86 per barrel in 2026, a $26 upward revision from January. Brent traded above $111 on Friday. That’s a 29 percent premium over the baseline forecast published four days ago. The report’s adverse scenario, which models sustained infrastructure damage and slow export recovery, projects an average of $115. The spot market is already there. The adverse scenario isn’t a tail risk. It’s the prompt price.
The Supply Shock Nobody Can Model
The IEA calls it “the largest supply disruption in the history of the global oil market.” Before the war, roughly 20 million barrels per day of crude and products transited the Strait of Hormuz. By March that number had collapsed to just over 2 million, per IEA data. The initial hit was approximately 10 million barrels per day of lost supply, according to the World Bank. US production surged to record levels. Saudi Arabia and the UAE pushed volumes through alternative routes, most notably from the Red Sea coast and the port of Fujairah. The IEA coordinated its largest-ever emergency release on March 11, committing 400 million barrels of strategic reserves across 32 member countries. It wasn’t enough.
JPMorgan’s head of global commodities strategy, Natasha Kaneva, told CNN on May 1 that total alternative supply is plugging the gap by only about 8 million barrels per day. Demand destruction has absorbed another 4.3 million barrels per day, worse than the 2.5 million recorded during the 2009 financial crisis. But the numbers still don’t balance. Parts of Asia and the Middle East are, in CNN’s phrasing, “literally running out of oil and fuel.” Europe is warning about imminent jet fuel shortages. US crude inventories fell by 6.2 million barrels in the last reported week, per the EIA, an unexpected draw that suggests America’s buffer is thinner than the headline gas price of $4.30 implies.
RBC Capital Markets’ Helima Croft, a former CIA analyst and one of the sharpest geopolitical commodity voices on the Street, put it bluntly: the White House has been “very successful in convincing a corner of the market that the war will be over soon.” The ceasefire that took hold in early April hasn’t reopened the strait. Trump reaffirmed on Friday that the US naval blockade of Iranian ports will continue until Tehran agrees to a nuclear deal. Iran’s new supreme leader, Mojtaba Khamenei, pledged not to surrender the country’s nuclear or missile capabilities and signaled that Tehran would retain control over the strait. That isn’t a path to $86 Brent.
Beyond Oil: Nine Markets Breaking
If your exposure is limited to crude, you’re missing most of the story. The World Economic Forum published a detailed analysis on April 1 mapping the non-oil commodities disrupted by the Hormuz closure. The list runs deeper than most desks have priced.
Fertilizers are the most consequential. The Arabian Gulf accounts for at least 20 percent of all seaborne fertilizer exports and 46 percent of global urea trade, per the WEF. The World Bank forecasts fertilizer prices rising 31 percent in 2026, with urea specifically up 60 percent. Affordability is projected to fall to its worst level since 2022, per the CMO. The World Food Programme warned that if these costs persist, up to 45 million additional people could be pushed into acute food insecurity this year. That’s not a forecast for 2027. That’s a forecast for the next harvest cycle.
Methanol is next. A third of global seaborne trade passes through Hormuz. China, the world’s largest buyer, faces falling port inventories that the WEF warns could drop below warning thresholds, raising costs across plastics, paints, and synthetic fibres. Then there’s synthetic graphite, whose production depends on petroleum coke, a byproduct of oil refining. As refineries optimise for higher-value outputs while crude prices rally, petroleum coke supply tightens, squeezing EV battery anode production at exactly the moment the metals complex is already under extreme pressure from the energy transition. The WEF identified nine commodities in total: oil, LNG, urea, methanol, aluminium, sulfur, synthetic graphite, petrochemicals, and green hydrogen feedstocks.
The Precious Metals Paradox
Gold hit an all-time high of $5,589.38 per ounce on January 28, per GoldSilver.com. On Friday it traded above $4,600. That’s a 15 percent decline since the war began, which is the opposite of what most investors would expect from history’s largest oil shock. The explanation is straightforward but uncomfortable: energy-driven inflation is forcing central banks to keep rates elevated or consider hiking, which raises the opportunity cost of holding non-yielding gold. The Fed held rates unchanged on April 29 with four dissenting members, per Trading Economics. The ECB is walking into a stagflation trap that could force its first hike since 2023. Higher real rates compress gold.
The World Bank forecasts precious metals prices rising 42 percent on average in 2026, driven by geopolitical safe-haven demand and central bank accumulation. The World Gold Council confirmed that central banks increased their reserves in Q1. UBS targets $6,200 by September. Societe Generale sees $6,000. JP Morgan’s base case is $5,000 by Q4. Silver, trading near $73 per ounce, is benefiting from a structural supply deficit and industrial demand from solar panels, electronics, and AI data centres. China’s silver imports hit a record 836 tonnes in March, up 78 percent month-over-month, per Benzinga. If the war drags on and rates plateau, gold resumes its climb. If the war ends and rates fall, gold resumes its climb. The path is different. The destination is the same.
The Macro Transmission
The World Bank’s framing is worth sitting with. Gill’s full statement reads: “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. The poorest people, who spend the highest share of their income on food and fuels, will be hit the hardest.” Deputy Chief Economist Ayhan Kose added that “governments must resist the temptation of broad, untargeted fiscal support measures that could distort markets and erode fiscal buffers.”
The numbers attached to those statements are severe. Developing economy inflation is projected at 5.1 percent under baseline assumptions, a full percentage point higher than pre-war estimates and a four-year high. Under the adverse scenario, that number rises to 5.8 percent, a level exceeded only in 2022 over the past decade. Developing economies are now expected to grow 3.6 percent, a 0.4 percentage point downward revision. Seventy percent of commodity importers and more than 60 percent of commodity exporters worldwide face weaker growth than was projected in January. The central bank policy response is constrained everywhere: hike rates and crush demand further, or hold and watch inflation de-anchor.
What the Physical Market Is Pricing
CNBC’s timeline of the war’s impact on oil, published April 21, traced the arc from Brent at $72 on February 27 to nearly $120 at its peak, a 51 percent surge in March alone, one of the largest single-month moves on record. Commodity Context founder Rory Johnston told CNBC that any reopening of the strait would trigger an immediate $10 to $20 drop from speculative unwind, but that infrastructure damage and production outages would keep the market structurally tight, likely anchoring Brent in the $80 to $90 range rather than returning to pre-crisis levels.
The World Bank’s baseline assumes that the most acute disruptions end in May and that shipping through Hormuz gradually returns to pre-war levels by late 2026. It is now May. The strait is closed. Trump is briefed on expanded military options, per Axios. Iran’s new supreme leader is more hardline than his predecessor. The ceasefire is holding on paper and failing in practice. European gas storage sits at eight-year lows heading into summer. The CMO’s own adverse scenario models oil 80 percent above the January baseline. Brent is already up 75 percent year-to-date.
The title of the World Bank’s report is “Commodity Markets Outlook.” The subtitle is “Global Economy in the Shadow of War.” But the line that will endure from this edition isn’t a forecast or a price target. It’s Gill’s closing: “War is development in reverse.” That’s not a commodity call. That’s a statement about what the market is actually pricing when it bids Brent to $111 and urea to a 60 percent annual gain and gold to $4,600 despite every reason it should be higher. It’s pricing destruction. And the math, as JPMorgan’s Kaneva noted, still doesn’t balance.
