Economy
Conflict in Middle East could bring ‘Dual Shock’ to global commodity markets–WBG
World Bank’s latest Commodity Markets Outlook has said that “although the global economy is in a much better position than it was in the 1970s to cope with a major oil-price shock, an escalation of the latest conflict in the Middle East—which comes on top of disruptions caused by the Russian invasion of Ukraine—could push global commodity markets into uncharted waters, according to the. The report provides a preliminary assessment of the potential near-term implications of the conflict for commodity markets. It finds that the effects should be limited if the conflict doesn’t widen. Under the Bank’s baseline forecast, oil prices are expected to average $90 a barrel in the current quarter before declining to an average of $81 a barrel next year as global economic growth slows. Overall commodity prices are projected to fall 4.1% next year. Prices of agricultural commodities are expected to decline next year as supplies rise. Prices of base metals are also projected to drop 5% in 2024. Commodity prices are expected to stabilise in 2025. The conflict’s effects on global commodity markets have been limited so far. Overall oil prices have risen about 6% since the start of the conflict. Prices of agricultural commodities, most metals, and other commodities have barely budged. The outlook for commodity prices would darken quickly if the conflict were to escalate. The report outlines what might happen under three risk scenarios based on historical experience since the 1970s. The effects would depend on the degree of disruption to oil supplies. In a “small disruption” scenario, the global oil supply would be reduced by 500,000 to 2 million barrels per day—roughly equivalent to the reduction seen during the Libyan civil war in 2011.
“Under this scenario, the oil price would initially increase between 3% and 13% relative to the average for the current quarter—-to a range of $93 to $102 a barrel. In a “medium disruption” scenario—roughly equivalent to the Iraq war in 2003—the global oil supply would be curtailed by 3 million to 5 million barrels per day. That would drive oil prices up by 21% to 35% initially—to between $109 and $121 a barrel. In a “large disruption” scenario—comparable to the Arab oil embargo in 1973— the global oil supply would shrink by 6 million to 8 million barrels per day. That would drive prices up by 56% to 75% initially—to between $140 and $157 a barrel. “The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s—Russia’s war with Ukraine,” said Indermit Gill, the World Bank’s Chief Economist and Senior Vice President for Development Economics. “That had disruptive effects on the global economy that persist to this day. Policymakers will need to be vigilant. If the conflict were to escalate, the global economy would face a dual energy shock for the first time in decades—not just from the war in Ukraine but also from the Middle East.”
“Higher oil prices, if sustained, inevitably mean higher food prices,” said Ayhan Kose, the World Bank’s Deputy Chief Economist and Director of the Prospects Group. “If a severe oil-price shock materialises, it would push up food price inflation that has already been elevated in many developing countries. At the end of 2022, more than 700 million people—nearly a tenth of the global population—were undernourished. An escalation of the latest conflict would intensify food insecurity, not only within the region but also across the world.” The fact that the conflict has so far had only modest impacts on commodity prices may reflect the global economy’s improved ability to absorb oil price shocks. Since the energy crisis of the 1970s, the report says, countries across the world have bolstered their defenses against such shocks.
“They have reduced their dependence on oil—the amount of oil needed to generate $1 of GDP has fallen by more than half since 1970. They have a more diversified base of oil exporters and expanded energy resources, including renewable sources. Some countries have established strategic petroleum reserves, set up arrangements for the coordination of supply, and developed futures markets to mitigate the impact of oil shortages on prices. These improvements suggest that an escalation of the conflict might have more moderate effects than would have been the case in the past. Policymakers nevertheless need to remain alert, the report says. Some commodities—gold in particular—are flashing a warning about the outlook. Gold prices have risen about 8% since the onset of the conflict. Gold prices have a unique relationship to geopolitical concerns: they rise in periods of conflict and uncertainty often signalling an erosion of investor confidence.
“If the conflict escalates, policymakers in developing countries will need to take steps to manage a potential increase in headline inflation. Given the risk of greater food insecurity, governments should avoid trade restrictions such as export bans on food and fertiliser. Such measures often intensify price volatility and heighten food insecurity. They should also refrain from introducing price controls and price subsidies in response to higher food and oil prices. A better option is to improve social safety nets, diversify food sources, and increase efficiency in food production and trade. In the longer term, all countries can bolster their energy security by accelerating the transition to renewable energy sources—which will mitigate the effects of oil-price shocks”.
The Arab Africa Trade Bridges (AATB) Program and the Federal Republic of Nigeria formalized a partnership with the signing of the AATB Membership Agreement, officially welcoming Nigeria as the Program’s newest member country. The signing ceremony took place in Abuja on the sidelines of the 5th AATB Board of Governors Meeting, hosted by the Federal Government of Nigeria.
The Membership Agreement was signed by Eng. Adeeb Y. Al Aama, the CEO of the International Islamic Trade Finance Corporation (ITFC) and AATB Program Secretary General, and H.E. Mr. Wale Edun, Minister of Finance and Coordinating Minister of the Economy, Federal Republic of Nigeria. The Agreement will provide a strategic and operational framework to support Nigeria’s efforts in trade competitiveness, promote export diversification, strengthen priority value chains, and advance capacity-building efforts in line with national development priorities. Areas of collaboration will include trade promotion, agribusiness modernization, SME development, businessmen missions, trade facilitation, logistics efficiency, and digital trade readiness.
The Honourable Minister of Finance and Coordinating Minister of the Economy, Mr. Wale Edun, called for deeper trade collaboration between African and Arab nations, stressing the importance of value-added Agribusiness and industrial partnerships for regional growth. Speaking in Abuja at the Agribusiness Matchmaking Forum ahead of the AATB Board of Governors Meeting, the Minister said the shifting global economy makes it essential for African and Arab nations to rely more on regional cooperation, investment and shared markets.
He highlighted projections showing Arab-Africa trade could grow by more than US$37 billion in the next three years and urged partners to prioritize value addition rather than raw commodity exports. He noted that Nigeria’s growing industrial base and upcoming National Single Window reforms will support efficiency, investment and private-sector expansion.
“This is a moment to turn opportunity into action”, he said. “By working together, we can build stronger value chains, create jobs and support prosperity across our regions”, Edun emphasized. “As African and Arab nations embark on this journey of deeper trade collaboration, the potential for growth and development is vast. With a shared vision and commitment to value-added partnerships, we can unlock new opportunities, drive economic growth, and create a brighter future for our people.”
Speaking during the event, Eng. Adeeb Y. Al Aama, Chief Executive Officer of ITFC and Secretary General of the AATB Program, stated: “We are pleased to welcome Nigeria to be part of the AATB Program. Nigeria stands as one of Africa’s most dynamic and resilient economies in Africa, with a rapidly expanding private sector and strong potential across agribusiness, energy, manufacturing, and digital industries. Through this Membership Agreement, we look forward to collaborating closely with Nigerian institutions to strengthen value chains, expand regional market access, enhance trade finance and investment opportunities, and support the country’s development priorities.”
The signing of this Agreement underscores AATB’s continued engagement with African countries and its evolving portfolio of programs supporting trade and investment. In recent years, AATB has worked on initiatives across agribusiness, textiles, logistics, digital trade, export readiness under the AfCFTA framework, and other regional initiatives such as the Common African Agro-Parks (CAAPs) Programme.
With Nigeria’s accession, the AATB Program extends it’s presence in the region and adds a key partner working toward advancing trade-led development and fostering inclusive economic growth.
Federal Executive Council (FEC) has approved the 2026–2028 Medium-Term Expenditure Framework (MTEF), a key fiscal document that outlines Nigeria’s revenue expectations, macroeconomic assumptions, and spending priorities for the next three years. The approval followed Wednesday’s FEC meeting presided over by President Bola Tinubu at the State House, Abuja. The Minister of Budget and Economic Planning, Senator Atiku Bagudu made this known after the meeting.
The Minister said the Federal Government is projecting a total revenue inflow of N34.33 trillion in 2026, including N4.98 trillion expected from government-owned enterprises. Bagudu said that the projected revenue is N6.55 trillion lower than earlier estimates, adding that federal allocations are expected to drop by about N9.4 trillion, representing a 16% decline compared to the 2025 budget.
He said that statutory transfers are expected to amount to about N3 trillion within the same fiscal year. On macroeconomic assumptions, FEC adopted an oil production benchmark of 2.6 million barrels per day (mbpd) for 2026, although a more conservative 1.8 mbpd will be used for budgeting purposes. An oil price benchmark of $64 per barrel and an exchange rate of N1,512 per dollar were also approved.
Bagudu said the exchange rate assumption reflects projections tied to economic and political developments ahead of the 2027 general elections. He said the exchange rate assumption took into account the fiscal outlook ahead of the 2027 general elections.
The minister said that all the parameters were based on macroeconomic analysis by the Budget Office and other relevant agencies. Bagudu said FEC also reviewed comments from cabinet members before approving the Medium-Term Fiscal Expenditure Ceiling (MFTEC), which sets expenditure limits. Earlier, the Senate approved the external borrowing plan of $21.5 billion presented by President Tinubu for consideration The loans, according to the Senate, were part of the MTEF and Fiscal Strategy Paper (FSP) for the 2025 budget.
The spot rate on Nigerian Treasury bills has been increased by 146 basis points by the Central Bank of Nigeria (CBN) following tight subscription levels at the main auction on Wednesday. The spot rate on Treasury bills with one-year maturity has now surpassed Nigeria’s 16.05% inflation by 145 basis points following a recent decision to keep the policy rate at 27%.
The Apex Bank came to the primary market with N700 billion Treasury bills offer size across standard tenors, including 91-day, 182-day and 364 day maturities. Details from the auction results showed that demand settled slightly above the total offers as investors began to seek higher returns on naira assets despite disinflation.
Total subscription came in at about N775 billion versus N700 billion offers floated at the main auction. The results showed rising appetite for duration as investors parked about 90% of their bids on Nigerian Treasury bills with 364 days maturity. The CBN opened N100 billion worth of 91 days bills for subscription, but the offer received underwhelming bids totalling N44.17 billion.
The CBN allotted N42.80 billion for the short-term instrument at the spot rate of 15.30%, the same as the previous auction. Total demand for 182 days Nigerian Treasury bills settled at N33.38 billion as against N150 billion that the authority pushed out for subscription. The CBN raised N30.36 billion from 182 days bills allotted to investors at the spot rate of 15.50%, the same as the previous auction.
Investors staked N697.29 billion on N450 billion in 364-day Treasury bills that was offered for subscription. The CBN raised N636.46 billion from the longest tenor at the spot rate of 17.50%, up from 16.04% at the previous auction.
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