Israel-Hamas conflict could lead to oil price spike: World Bank

The war between Israel and Hamas could trigger price shocks for raw materials such as oil and agriculture products if the conflict escalates across the Middle East, the World Bank warned in a report yesterday.

Oil has already risen six percent since the latest round of fighting, sparked when Hamas militants from Gaza stormed southern Israel.

The conflict between Israel and Hamas comes as Russia's war in Ukraine has already put pressure on markets, with that war being "the biggest shock to commodity markets since the 1970s," warned World Bank chief economist Indermit Gill.

"That had disruptive effects on the global economy that persist to this day," Gill said in a statement.

"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" from both the war in Ukraine and conflict in the Middle East, he said.

The World Bank report simulates three scenarios for the global oil supply in the event of a small, medium or large disruption.

Effects should be limited if the conflict doesn't widen in a "small disruption" scenario — as oil prices are expected to decline to an average of $81 a barrel next year, the World Bank estimates.

But during a "medium disruption" — equivalent to the disruptions experienced during the Iraq war — the global oil supply would decline by 3 million to 5 million barrels per day, driving oil prices up possibly by 35 percent.

In a "large disruption" scenario — comparable to the Arab oil embargo of 1973 — the global oil supply would shrink by 6 million to 8 million barrels per day and prices could go up by 56 percent to 75 percet, or $140 to $157 a barrel, according to the report.