As the world is reeling under economic pressure, US President Donald Trump has reportedly instructed aides to prepare for an extended blockade of Iran. According to a report by the Wall Street Journal, Trump opted to continue squeezing Iran's economy and oil exports by preventing shipping to and from its ports in his recent meetings with top US officials.
The report noted that Trump believes that including resuming bombing or walking away from the conflict carries more risk than maintaining the blockade. The concerning report came at a time when the world’s economy is already in peril.
Though there is a ceasefire in the US-Israeli war with Iran, the conflict remains deadlocked while the sides seek a formal end to the fighting, with Iran shutting shipping flows through the Strait of Hormuz, a conduit for about 20 per cent of global oil and liquefied natural gas supplies, and the US blockading Iranian ports.
Oil prices rose on Wednesday, extending a multi-day rally, on reports that the US will extend its blockade of Iranian ports, likely prolonging supply disruptions from the key Middle East producing region.
Energy prices expected to rise by 24%
Energy prices are expected to surge by 24 per cent in 2026 to their highest level since Russia’s full-scale invasion of Ukraine four years ago, if the most acute disruptions caused by the war in the Middle East end in May, the World Bank said on Tuesday. Commodity prices could rise even further if hostilities in the region escalated and supply disruptions lasted longer than expected, the global development bank said in its latest Commodity Markets Outlook. The report underscores if the situation persists, it would push the prices of a one time meal a record high
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"The war is hitting the global economy in cumulative waves: first through higher energy prices, then higher food prices, and finally, higher inflation, which will push up interest rates and make debt even more expensive," World Bank chief economist Indermit Gill said. The shock would hit the poorest hardest, adding to the woes of highly indebted developing countries.
Fertiliser prices likely to increase by 31%
Fertiliser prices were projected to increase by 31 per cent in 2026, driven by a 60 per cent jump in the price of urea, the most widely used solid nitrogen fertiliser, which is produced by converting natural gas to produce ammonia and carbon dioxide.
The surge in fertiliser prices would fuel pressures on food supply, eroding farmers' incomes and threatening future crop yields. The World Food Programme estimates that 45 million more people could face acute food insecurity this year, if the war continues for a prolonged period.
Developing countries countinue to face the inflation heat
The World Bank said inflation in developing economies was now projected to average 5.1 per cent in 2026, under the baseline scenario, up from 4.7 per cent last year and a full percentage point higher than pre-war forecasts. But inflation could rise as high as 5.8 per cent in developing economies if the war were prolonged.
Growth would also take a big hit, the bank said. Developing economies were now projected to grow by just 3.6 per cent in 2026, down from a pre-war forecast of 4 per cent growth.
(With inputs from Reuters)
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