The World Bank Group has issued a stark and urgent warning that the ongoing conflict in the Middle East is triggering one of the most significant shocks to global commodity markets in recent memory.
This turmoil is not just a regional issue; its ripple effects are being felt worldwide, particularly in emerging markets like Botswana. Prices for essential commodities such as energy, fertilizers, and metals are soaring, driven by supply disruptions and geopolitical uncertainty. These price surges are expected to fuel higher inflation rates and slow down economic growth in vulnerable economies that depend heavily on imports and commodity-related industries.
In its latest Commodity Markets Outlook report, the World Bank described the ongoing conflict as causing “the largest oil supply loss on record.” This unprecedented disruption has severely rattled global trade flows, leading to sharp price spikes amid already mounting geopolitical tensions. The report paints a grim picture of how intertwined the world’s economies are and how fragile supply chains have become in the face of conflict and instability.
According to the World Bank’s projections, average global commodity prices are set to rise by 16 percent in 2026. This marks the first annual increase since 2022, signaling a reversal of the downward price trends seen in recent years. Energy prices, in particular, are forecast to surge by an alarming 24 percent as shortages in oil and natural gas supplies deepen. The report highlights how these shortages are not only a result of direct conflict-related damage but also due to strategic chokepoints like the Strait of Hormuz, which plays a critical role in global energy transportation.
Shipping disruptions through the Strait of Hormuz, a narrow but vital waterway connecting the Persian Gulf to the Arabian Sea, have drastically reduced energy supplies reaching global markets. This bottleneck has triggered a rapid escalation in the prices of oil and natural gas, commodities that are fundamental to powering industries, transportation, and households worldwide. The World Bank’s analysis assumes that the most intense phase of these trade disruptions will end by May, with shipping volumes gradually returning to near prewar levels by October. Even with this optimistic timeline, the report maintains that the resulting price increases will be substantial.
The energy markets remain at the heart of this crisis. The World Bank projects that average energy prices will climb 24 percent this year as supply shortages worsen. Brent crude oil, a global benchmark, is now expected to average $86 per barrel in 2026, an increase of $26 compared to earlier forecasts. This upward revision reflects the heightened risks of continued supply constraints and geopolitical instability. The institution also warns that if the conflict persists or escalates further, the risks are skewed toward even higher prices. In a more severe disruption scenario, Brent crude oil could trade between $95 and $115 per barrel, levels that would place significant strain on economies dependent on affordable energy.
Beyond energy, the report highlights widespread supply disruptions across other critical commodities, including fertilizers, food staples, industrial metals, and precious metals. Fertilizer prices are anticipated to soar, driven by export interruptions from key producing countries and rising production costs linked to energy price hikes. This surge in fertilizer costs is expected to increase agricultural expenses globally, placing upward pressure on food prices and threatening food security in many regions.
At the same time, prices for base metals such as copper, aluminum, and nickel are projected to reach record highs. These metals are essential for manufacturing, construction, and the transition to cleaner energy technologies such as electric vehicles and renewable energy infrastructure. The combination of constrained supplies and steady demand from these sectors is creating a perfect storm pushing metal prices upwards. Precious metals like gold and silver are expected to remain highly volatile, as investors seek safe-haven assets amid geopolitical uncertainty and market turbulence.
For Botswana, the consequences of these developments are particularly significant. As a small, import-dependent economy deeply entwined with global commodity markets, Botswana faces heightened vulnerability to imported inflation, especially through rising fuel, food, and transportation costs. The country’s reliance on imported energy means that increasing global oil prices are expected to directly impact domestic fuel prices. This will drive up transportation expenses across the economy, affecting everything from the cost of goods to the operating costs of businesses, thereby straining both consumers and the private sector.
Higher fertilizer costs pose additional risks for Botswana’s agricultural sector and the broader Southern African region. Increased prices may disrupt regional agricultural production, potentially exacerbating food inflation just as households are already grappling with rising living costs. The combination of these factors creates a challenging environment for policymakers trying to balance economic growth with price stability. Reflecting these pressures, the Bank of Botswana’s Monetary Policy Committee recently raised the Monetary Policy Rate by 200 basis points, from 3.5 percent to 5.5 percent. This represents the steepest hike since 2017, signaling the central bank’s determination to rein in inflation despite the economic headwinds.
The World Bank’s forecast places inflation well above Botswana’s medium-term target range of 3 to 6 percent for much of the year. Botswana’s monetary policy framework is built on a forecast-based strategy aimed at maintaining inflation within this target range while supporting sustainable economic growth. Yet the latest inflation outlook suggests that external shocks, such as surging global commodity prices, are increasingly overpowering domestic efforts to stabilize prices and maintain economic momentum.
The country’s economy remains heavily reliant on diamonds, which account for a large portion of export earnings and government revenue. However, the diamond sector faces its own set of challenges. Weakening global demand, shifting consumer trends toward synthetic alternatives, and ongoing volatility in international markets have clouded the outlook for this crucial industry. This uncertainty has left the government grappling with widening fiscal deficits, slower growth, and mounting public debt pressures, complicating efforts to manage the economy effectively.
The convergence of external commodity shocks and domestic economic vulnerabilities has raised concerns that Botswana could face a prolonged period of stagflation, a rare but troubling economic condition characterized by slowing growth alongside persistently high inflation. Such a scenario would pose serious challenges for policymakers, businesses, and households alike, requiring careful navigation of trade-offs between stimulating growth and controlling inflationary pressures.
The World Bank’s latest report underscores the fragile state of global commodity markets amid geopolitical turmoil and highlights the significant risks facing emerging economies like Botswana. With energy and commodity prices set to rise sharply, the path ahead is fraught with challenges that will test the resilience of economies and the effectiveness of policy responses in the months and years to come.