The World Bank believes that we are witnessing the biggest oil shock in history and, even in the optimistic scenario where the Strait of Hormuz would reopen in May, oil deliveries will not be able to return to pre-war levels until the end of the year. The impact will be severe on all goods, but especially on fertilizers that determine global food prices. Warning for over-indebted states, regarding the increase in interest rates.
In its Commodity Markets Outlook report, the World Bank takes into account several scenarios to determine the increasingly severe impact of the Persian Gulf war on the global economy. The price increase is just the first step of a broader crisis that is now looming, as the inevitable global inflation will lead to interest rate increases, which will put a lot of pressure on indebted countries.
“The war hits the global economy in cumulative waves: first through the rise in energy prices, then through the rise in food prices and, finally, through a higher general inflation, which will lead to an increase in interest rates and will make debt even more expensive”, stated Indermit Gill, chief economist of the World Bank Group.
Also, the impact will be felt on a personal level, because, as Gill points out, “the poorest people, who spend most of their income on food and fuel, will be the most severely affected, similarly to developing (poorer – ed.) countries that are already struggling with heavy debt burdens. All of these are a reminder of a harsh truth: war is the opposite of development,” said the chief economist of the World Bank.
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