The ongoing tensions in the Middle East could lead to higher global inflation, as indicated by a report from the World Bank. The Israeli military campaign in Gaza has caused increased tensions and higher oil prices in the region, which is driving up commodity prices, particularly for oil and gold. According to the bank, the deflationary impact of lower commodity prices has ended, and this could lead to an increase in global inflation.
The World Bank’s Chief Economist and First Vice President, Indermeet Gill, expressed concern that a major energy shock caused by the conflict could reverse progress made in reducing inflation over the past two years. 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 inflation, the conflict in the Middle East could delay interest rate cuts and exacerbate food insecurity. Food prices have already been on the rise due to armed conflicts and high food prices. To avoid further economic impacts, the World Bank emphasized the need for a peaceful resolution to tensions in the region.
The bank also noted that ongoing tensions in the Middle East could jeopardize recent progress made towards addressing global inflation. Lower commodity prices contributed to lower inflation rates over the past two years, but this progress could be reversed if there were significant disruptions to oil supply or other commodities markets.
Overall, it is crucial for regional leaders and international actors to work towards a peaceful resolution of tensions in order to prevent further economic instability and maintain stability across global markets.