World Bank warns Middle East conflict could lead to spike in fuel prices

Oct. 26 (UPI) -- The recent eruption of conflict in the Middle East has cast a shadow of uncertainty over global commodity markets, with potential repercussions for oil and food prices domestically.

The World Bank noted a historical pattern of unpredictability in energy prices during Middle East conflicts in its latest Commodity Outlook.

In the current conflict, experts said there has been a 9% increase in energy prices, specifically a 6% rise in oil prices, driven by concerns about how the conflict will impact supplies moving forward.

Presently, the effects of the Middle East conflict on commodity prices have been relatively moderate. While oil and gold prices have experienced modest increases, The World Bank said most other commodities have maintained their stability.

However, The World Bank warned that if the conflict were to intensify, it could result in significant price hikes for oil and exacerbate food insecurity, both within the Middle East and globally.

As the world closely watches the evolving situation in the Middle East, market participants and experts are keeping a vigilant eye on commodity markets, recognizing the potential impact on oil and food prices on a domestic and global scale in the coming months.

Experts said a major escalation, such as the disturbance created by the 1973 Arab oil embargo, could result in major supply shortages internationally. The price of a barrel of oil could potentially surge from approximately $90 to a range between $140 and $157.

Indermit Gill, the World Bank's chief economist, emphasized the timing of the recent Middle East conflict, which follows the largest shock to commodity markets since the 1970s, caused by Russia's conflict with Ukraine.

"Policymakers will need to be vigilant," Gill told The Guardian. "If the conflict were to escalate, the global economy would face a dual energy shock for the first time in decades -- not just from the war in Ukraine but also from the Middle East."

This comes following concerns that the conflict against Hamas is intensifying.

The Israeli military expanded its ground invasion of Gaza overnight Sunday, while its warplanes also targeted military sites in Syria and Lebanon.

Although Israeli forces had previously entered Gaza last week and engaged in skirmishes with Hamas, the long-anticipated ground invasion officially began on Saturday when Israeli Prime Minister Benjamin Netanyahu announced that troops had entered the Palestinian enclave, marking the start of the second phase of the conflict.

Israeli military officials reported that a total of approximately 600 targets were struck over the weekend, including weapons warehouses, anti-tank positions, and locations where Hamas members were hiding and gathering.

As the ground invasion continues, Israel is also engaged with militants along its northern border in Syria and Lebanon.