Ongoing tensions in the Middle East — particularly the conflict involving Iran and disruption around the Strait of Hormuz — have materially increased commodity price volatility, especially in energy. The World Bank now expects overall commodity prices to rise ~16% in 2026, with energy prices up ~20–25%, reflecting supply disruptions and elevated geopolitical risk premia. While demand remains mixed, upside risks to prices persist given fragile supply chains and limited spare capacity. Maintaining a diversified commodity allocation, with active management, remains a key hedge against inflation and energy security shocks.
The conflict is reshaping global supply chains well beyond oil. Severe constraints in the Strait of Hormuz — a critical corridor for oil, gas, fertilisers, and industrial inputs — have driven up freight, insurance, and logistics costs while lengthening delivery timelines. Disruptions are particularly acute in fertilisers and agricultural inputs, with a significant share of global trade routed through the Gulf, raising concerns about food security and inflation as planting seasons are affected. These pressures are compounding existing trade fragmentation and forcing companies to reconfigure sourcing strategies and build resilience into supply networks.
The IMF’s April 2026 World Economic Outlook has revised global growth down to ~3.1% for 2026, with inflation expected to tick up before easing again. The downgrade reflects the inflationary shock from higher energy and food prices, tighter financial conditions, and heightened uncertainty linked to the conflict.
