The World Bank warned yesterday that an escalation in the Middle East conflict could push the price of oil to unknown levels, which could be reflected in a global increase in food prices.

According to the most recent edition of the World Bank's report, quoted by Lusa, on Commodity Market Prospects, "today the global economy is much better prepared to deal with major oil price shocks than it was in the 1970s".

But an escalation in the war between Israel and Hamas, together with "the disruptions caused by Russia's invasion of Ukraine, could take the global commodities markets" to uncharted territory.

According to the report, the effects of the conflict on these markets "have so far been limited".

"Global oil prices have risen by around 6% since the beginning of the conflict" and agricultural products have hardly changed, he says.

According to the World Bank's benchmark forecast, "oil prices are expected to reach an average of 90 dollars per barrel this quarter, before falling back to an average of 81 dollars per barrel next year as global economic growth slows".

However, the outlook "would worsen rapidly if the conflict escalated" and the report describes what could happen in three risk scenarios "based on historical experiences since the 1970s", depending on the degree of disruption to the oil supply.

In a "little disruption" scenario, the global oil supply would be reduced by 500,000 to 2 million barrels per day - roughly equivalent to the reduction observed during the civil war in Libya in 2011. In this scenario, the price of oil would initially increase by 3% to 13% compared to the average for the current quarter and the barrel would be between 93 and 102 dollars.

In a context of "medium disruption" (equivalent to the Iraq war in 2003), the global oil supply would fall by 3 million to 5 million barrels per day, causing oil prices to initially rise between 21% and 35% - in other words, from 109 to 121 dollars per barrel.

In a "major disruption" scenario (comparable to the Arab oil embargo in 1973), global oil supply would fall by 6 million to 8 million barrels per day, causing prices to initially rise to between 56% and 75%, which would equate to a price of 140 to 157 dollars per barrel.

"The latest conflict in the Middle East follows the biggest shock to commodity markets since the 1970s, namely Russia's war with Ukraine," said Indermit Gill, chief economist at the World Bank, quoted in the report.

"We have observed disruptions in the global economy that persist to this day," he added, warning that "if the conflict escalated, the global economy would face a double energy shock for the first time in decades - not only resulting from the war in Ukraine, but also from the conflict in the Middle East."

The rise in oil prices, "when it continues, inevitably translates into a rise in food prices," said Ayhan Kose, deputy chief economist at the World Bank and director of the Outlook Group.

"If oil prices suffer a severe shock, this would increase food price inflation, which has already been high in many developing countries. By the end of 2022, more than 700 million people - almost a tenth of the world's population - were suffering from malnutrition. An escalation of conflicts would intensify food insecurity, not only in the region, but also in the rest of the world," he warned.