ISTANBUL
- IMF, IEA, World Bank warn energy, inflation and commodity shocks may persist despite end of war
- Gulf countries, developing economies have been disproportionately affected by energy disruptions, inflation pressures, weaker growth
The US-Iran peace agreement may have eased immediate fears in financial markets, but economists say the conflict has already left a significant mark on the global economy through higher energy prices, rising inflation, weaker growth and disruptions to commodity markets.
The agreement is expected to reopen the Strait of Hormuz, one of the world’s most important energy corridors, after months of disruption that rattled global markets and triggered the largest energy shock since the outbreak of the Ukraine war.
Reports by the World Bank, International Monetary Fund (IMF) and International Energy Agency (IEA) suggest the conflict’s consequences extended far beyond the Middle East, affecting everything from fuel and fertilizer prices to economic growth forecasts and food security.
In a joint statement issued in May, the heads of the IEA, IMF, World Bank and World Trade Organization warned that the war was generating “substantial and highly asymmetric impacts on energy supplies, food security, and economic activity across countries and regions.”
The conflict has disproportionately affected the most vulnerable countries, it noted.
Energy shock
Before the war, around 20 million barrels of oil and petroleum products passed through the Strait of Hormuz every day, according to the IEA. The prolonged disruption of shipping through the waterway triggered sharp increases in oil, gas and fuel prices worldwide.
The World Bank said that the closure of the strait severely disrupted energy markets and projected Brent crude oil prices to average $94 per barrel in 2026, around 36% higher than 2025 levels, assuming the worst disruptions ease in July.
Brent crude futures surged from around $72 per barrel before the conflict to as high as $120 at the height of the crisis. Following the peace agreement, prices retreated to below $80.
Jet fuel prices more than doubled during the conflict, rising above $210 per barrel before easing to around $140.
European natural gas markets experienced a similar shock. Benchmark Dutch TTF gas futures climbed from roughly €31 ($36) per megawatt-hour before the conflict to around €62 before later falling back toward €41 amid expectations of the reopening of Hormuz.
IEA Executive Director Fatih Birol in April described the conflict as the “biggest energy security threat in history,” warning that damage to energy infrastructure could have lasting consequences even after hostilities subside.
The IEA estimated that global oil supply losses reached nearly 13 million barrels per day, while 84 energy facilities across the region sustained damage, including 34 classified as seriously or damaged.
Birol said some facilities may require at least two years to return to full production even if the strait reopens safely.
Consultancy Rystad Energy estimated repair costs for damaged energy infrastructure at between $34 billion and $58 billion.
Inflation pressures spread
The energy shock quickly filtered through the broader economy, increasing transportation expenses, electricity prices, industrial production costs and agricultural input prices, particularly fertilizers.
The World Bank forecasts global inflation to rise to 4% in 2026 from 3.3% in 2025, largely as a result of higher energy and fertilizer costs. In a more severe scenario involving prolonged disruptions and financial stress, inflation could climb to 4.4%.
In April, the IMF said global headline inflation is expected to reach 4.4% this year before easing to 3.7% next year. It also warned that under a severe scenario, global inflation could exceed 6% by 2027, with developing economies facing significantly larger impacts than advanced economies.
In the US, the annual inflation in May rose to 4.2% – its highest level in more than three years.
The peace deal may ease inflation risks, but central banks are expected to remain cautious until lower oil and gas prices feed through to the broader economy.
Growth forecasts downgraded
The conflict has also darkened the global growth outlook.
According to the World Bank’s latest Global Economic Prospects report, global growth is expected to slow to 2.5% in 2026 from 2.9% in 2025, marking the weakest pace since the COVID-19 pandemic.
Growth forecasts for roughly two-thirds of economies have been downgraded since January, with developing economies expected to be hit particularly hard.
The World Bank said growth across emerging markets and developing economies has been downgraded to 3.6% this year from 4.4% in 2025, reflecting the impact of higher energy prices, tighter financial conditions, geopolitical tensions and weaker trade growth.
Gulf economies exposed to the conflict are expected to be among the hardest hit. The World Bank expects their growth to fall from 3.9% in 2025 to near zero in 2026 before recovering as reconstruction efforts begin.
The IMF has also lowered its global growth expectations and projected that Iran’s economy will contract by 6.1% this year. The economies of Iraq and Qatar are expected to shrink by 6.8% and 8.6%, respectively.
To help countries cope with the economic fallout, the World Bank said it is immediately making up to $50 billion-$60 billion available through existing financing mechanisms and could increase support to as much as $100 billion over the next 15 months if conditions worsen.
Food, fertilizer, commodity markets
The conflict’s effects extended beyond energy markets into a broad range of commodities, and fertilizer markets emerged as a particular concern.
The World Bank noted that the Gulf region is a critical supplier of fertilizers, especially urea, as well as chemical inputs such as sulfur and helium that are essential to global industry.
The World Food Program warned earlier this year that a prolonged conflict could push as many as 45 million additional people into acute food insecurity.
Fertilizer prices are projected to rise 31% this year, led by a 60% increase in urea prices. The World Bank warned that fertilizer affordability could deteriorate to its worst level since 2022.
The bank forecasts overall commodity prices to rise 16% this year.
Prices for several industrial metals are also expected to remain elevated. The bank said aluminum, copper and tin prices could reach record highs as supply chains adjust to disruptions across the region.
Precious metals experienced sharp volatility throughout the conflict. Gold, silver and other safe-haven assets fluctuated significantly as investors responded to changing expectations regarding the duration and intensity of the war.
While the peace agreement has helped calm markets and improve expectations for energy supplies and trade, economists say the conflict has already left a lasting imprint on inflation, growth and commodity markets, with some effects likely to persist long after fighting ends.
