The World Bank projects energy prices will jump 24 percent in 2026, driven by tensions between Iran and Israel that threaten global oil supplies.
The conflict has already pushed crude oil prices higher and created uncertainty in Middle Eastern energy markets. Higher energy costs ripple through economies worldwide. Businesses pay more to transport goods. Heating and electricity bills climb for households. Manufacturers face squeezed profit margins.
The price surge will slow economic growth across developed and developing nations. Companies hesitate to invest when costs are unpredictable. Workers lose purchasing power as inflation outpaces wage growth. Central banks face pressure to raise interest rates, which makes borrowing more expensive for businesses and consumers.
The World Bank warns this creates a difficult tradeoff. Policymakers must choose between controlling inflation and supporting growth. Countries dependent on energy imports face the sharpest pain. Oil-producing nations may benefit from higher prices, but only if the conflict doesn't disrupt production facilities.
The outlook assumes current tensions persist but don't escalate into broader military action. A wider war could push prices even higher. Energy markets remain fragile. Even small supply disruptions trigger sharp price movements because demand is relatively fixed. Power plants and factories cannot easily switch fuels overnight.
Governments must prepare now. Energy reserves matter. So does investment in alternatives and efficiency. The 2026 forecast gives policymakers time to act, but not much.