Tensions in the Middle East are threatening recent progress in combating global inflation, cautions the World Bank. The ongoing military campaign in Gaza by Israel has driven up oil prices and created a ripple effect across the region, impacting key commodities like oil and gold.
In its latest assessment of global commodity markets, the World Bank highlighted the upward pressure on prices due to the heightened tensions in the Middle East. This shift marks a departure from the previous trend of declining commodity prices, which had contributed to easing inflationary pressures worldwide.
World Bank’s chief economist, Indermit Gill, noted the concern that the decline in commodity prices, a significant factor in disinflation, has reached a standstill. This development implies a potential for interest rates to remain higher than initially anticipated, posing risks to global economic stability in the near term.
A key concern raised by the World Bank is the possibility of a significant shock to oil prices in the event of a conflict-related supply disruption. The organization estimates that such a disruption could push the average cost of Brent crude oil to $92 per barrel under moderate circumstances and exceed $100 per barrel under severe disruptions. This scenario could potentially elevate global inflation by close to one percentage point within the current year.
Beyond the immediate economic implications, heightened tensions in the Middle East could exacerbate food insecurity, which had already been a pressing issue due to armed conflicts and elevated food prices in the previous year, according to the World Bank’s assessment.
As the conflict in Gaza persists and regional tensions remain elevated, uncertainties loom over the global economic outlook. The potential for further disruptions in commodity markets and inflationary pressures underscores the need for cautious monitoring and proactive measures to mitigate risks to global economic stability.
photo source: Google
By: Montel Kamau
Serrari Financial Analyst
26th April, 2024
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