According to the “Commodity Markets Outlook Report” released by the World Bank in October 2023, the increased uncertainty following Russia’s war in Ukraine and conflicts in the Middle East could drag commodity markets into a concerning period.
The report highlighted that these conflicts could create a possible “double shock” effect in commodity markets. Additionally, the report mentioned that this situation could threaten not only regional but also global stability in commodity markets.
Commodity Market Uncertainty
One of the significant points emphasized in the report is the uncertainty in commodity markets that have been grappling with extraordinary shocks in recent years.
Another highlighted point is that prior to the conflict, the Organization of the Petroleum Exporting Countries (OPEC) and some non-OPEC producer countries reducing oil supply resulted in a 9% increase in energy prices and a 5% rise in the World Bank’s commodity price index.
Limited Impact for Now, Yet Risks Escalate
The report stressed that the current impact of the conflict on commodity prices is limited, but in the event of an escalation in the conflict, a substantial increase in oil and other commodity prices is inevitable. Additionally, it was mentioned that supply disruptions, trade restrictions, and factors such as lower-than-expected global growth could have adverse effects on commodity prices.
Future Expectations and Risk Scenarios
As per the scenarios anticipated in the report, any disruption in oil supply could push prices to a range of $93 to $102 per barrel. Moderate and significant disruptions, however, could elevate prices to a range of $109 to $157. While stability in commodity prices is expected until 2025, a decrease in energy prices is anticipated.
World Bank officials highlighted the necessity for policymakers to take precautions in case of an escalation in the conflict concerning issues like inflation and food insecurity.
The World Bank’s Chief Economist, Indermit Gill, expressed that the conflict could have a significant impact on the global economy and emphasized the need for policymakers to be cautious. Similarly, the World Bank’s Deputy Chief Economist, Ayhan Köse, mentioned that high oil prices could raise food prices and potentially increase food inflation in developing countries.