Middle East Tensions Threaten Global Inflation Progress, Warns World Bank

Ongoing tensions in the Middle East could jeopardize recent progress made in addressing global inflation, warns the World Bank. The Israeli military campaign in Gaza has contributed to higher oil prices and increased tensions in the region, which are driving up commodity prices, particularly for oil and gold. The bank noted that the deflationary impact of lower commodity prices has ended, leading to higher global inflation.

More than 200 days after the conflict in Gaza, regional tensions remain high. According to Indermeet Gill, Chief Economist and First Vice President of the World Bank Group, the decline in commodity prices that contributed to lower inflation has stalled. He expressed concern that a major energy shock caused by the conflict could reverse progress made in reducing inflation over the past two years. The bank warned that if there were significant disruptions to oil supply, the price of Brent crude could rise to $92 or even $100, leading to a one percentage point increase in global inflation.

In addition to impacting inflation, the conflict in the Middle East could delay interest rate cuts and exacerbate food insecurity. The World Bank emphasized the need for a peaceful resolution to the tensions in the region to avoid further economic impacts.