List Of Commodities Whose Prices Are Likely To Shoot Due To Growing Global Conflict

• The global supply chain continued to feel pressure from the ongoing tension between Israeli and Hamas, coupled with the Russia-Ukraine conflict
• The World Bank warned that escalated geopolitical tension could accelerate a spike in global commodities
• In its Commodity Markets Outlook, the global lender highlighted commodities most likely to be affected, including agricultural produce

TUKO.co.ke journalist Wycliffe Musalia brings over five years of experience in financial, business, and technology reporting, offering deep insights into Kenyan and global economic trends.

World Bank has projected a decline in the global supply chain, escalated by heightened geopolitical tension.

The global lender, in its Commodity Markets Outlook for April 2024, showed that the ongoing Russia-Ukraine and Israeli-Hamas conflicts could continue to exert pressure on the prices of critical commodities.

The report explained that the increase in demand for industrial supply has accompanied recent price hikes.

"Given tight supply conditions for many industrial commodities, moderate upside surprises to economic activity may lead to notable price shifts," read the report in part.

In an exclusive interview with TUKO.co.ke, Petroleum Outlets Association of Kenya (POAK) chair Martin Chomba noted that the war in the Middle East will affect Kenya's petrol prices and other commodities.

Chomba explained that the increase in global fuel prices and the fresh fall in the value of the shilling against the US dollar could mean more fuel and food prices, thus increasing inflation.

"There has been a recent surge in global fuel prices exacerbated by what is happening between Israelis and Hamas. We (Kenya) will start feeling the heat in the coming months... from the May and June pump price reviews," said Chomba.

List of commodities whose prices will increase

1. Crude oil

In April 2024, crude oil and Brent prices rose to $86.3 (KSh 11,237) and 90.5 (KSh 11,784), respectively, Trading Economics reported.

The World Bank projected average oil prices to hit $102 (KSh 13,651) per barrel in 2024.

"Further conflict escalation involving one or more key oil producers could result in extraction and exports in the region being curtailed, rapidly lessening global oil supply," World Bank noted.

In Kenya, pump prices have been falling in the last five months, coupled with the past two months' appreciation of the Kenya shilling.

Energy and Petroleum Regulatory Authority (EPRA) announced a decrease of KSh 5.31 per litre of petrol, KSh 10 per litre of diesel and KSh 18.68 per litre of kerosene in April.

2. Cooking gas

Chomba added that prices of Liquefied Petroleum Gas (LPG) have been on the rise in the last three months following and increase in demand.

"There has been a high demand for LPG in Europe and areas that experience winter for heating. This exerted pressure on the supply chain, which is currently affected by global conflicts. This is why you are seeing a surge in cooking gas prices," he said.

Refilling a 13kg gas cylinder in Kenya cost an average of KSh 3,231.84 in March, up from KSh 3,187.10 in February.

According to the World Bank, the Middle East is a crucial gas supplier—20% of global LPG trade transits the Strait of Hormuz.

3. Fertiliser

The World Bank report warned that if the gas supply is interrupted, fertilizer prices could, in turn, rise substantially.

"Fertilizer prices will likely continue a sharp descent, driven by lower costs for inputs such as natural gas," read the report in part.

President William Ruto's administration has been banking on a steady fertiliser supply to run its subsidy programme aimed at food prices in the country.

A shortage of fertiliser supply could translate to reduced farm inputs, thus affecting Kenya's food security plans.

4. Wheat

The World Bank further warned that intensified attacks on Ukraine’s export facilities could reduce grain supplies.

"More broadly, the confluence of geopolitical tensions and ongoing conflicts, including Russia’s invasion of Ukraine, could adversely affect staple food supplies," the report continued in part.

A spot check by TUKO.co.ke indicated that wheat flour in the market remained at a high of KSh 190 per 2kg, with some brands retailing at KSh 200.

5. Metals

According to the World Bank, the metals price index is expected to see little change in 2024-25.

"Base metal prices are forecast to edge up in both years and remain well above 2015-19 levels, reflecting a pick-up in global industrial activity and growing production of clean energy technologies," said the World Bank.

Steel prices increased globally in three months following a market shortage of the steel supply.

Leading global market suppliers like China (52%) reported a slump in crude steel production, resulting in high prices. Market indicators showed a 29.5% rise in steel prices from $1458.37 (KSh 181,057) per tonne reported in October 2022 to $1964.12 (KSh 243,845) in January 2023.

What to know about global conflicts effect on prices

• According to market analysts, fuel prices might skyrocket if the crisis in the Middle East worsens and interrupts global supply.
• Kenyan economists have warned that the Russian attack on Ukraine's grain storage facilities could adversely affect the country's food security and destabilise its economy further.

Proofreading by Otukho Jackson, a multimedia journalist and copy editor at TUKO.co.ke