Middle East conflict and how storage could help reduce global food prices

The World Bank has predicted that conflict in the Middle East could lead to a dramatic spike in oil prices, which is linked to increases in food prices – however it’s argued that the forecasts do not take into account the ability of energy storage to meet demand


November 24, 2023

  • World Bank says Middle East conflict could see oil prices hit $157 per barrel
  • But forecast is ‘underestimating ability of energy storage’ to satisfy demand
  • Oil prices impact on food prices – more energy storage would ensure more food security

The recent reignition of conflict in the Middle East led to warnings from the World Bank that any potential escalation could push global commodity markets into “uncharted waters”. The international financial institution has predicted the outlook for commodity prices would “darken quickly” if the conflict were to escalate. And the effects on commodity prices would depend on the degree of disruption to oil supplies, the World Bank said.

Specifically, the World Bank outlined three potential scenarios dependent on the extent of oil supply disruption. In a “small disruption” scenario, the global oil supply would be reduced by 500,000 to 2 million barrels per day (to provide some context, global oil production in 2022 amounted to 94 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 per cent and 13 per cent – relative to the average for Q4 2023 – to a range of $93 to $102 a barrel.

However, 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. This scenario would lead to oil prices increasing by 21% to 35% initially, which would push them into the range of between $109 and $121 a barrel. But in a “large disruption” scenario – which would be 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.

Source: World Bank

Why oil prices impact on food prices

The fact that the resurgence in major conflict in the Middle East comes at the same time as the war in Ukraine further increases concerns. As the World Bank has highlighted, Russia’s invasion of Ukraine resulted in the “biggest shock to commodity markets since the 1970s”. Consequently, the World Bank has warned that an escalation of the conflict in the Middle East would mean the global economy would face a dual energy shock for the first time in decades.

Chief among the concerns is an increase in food prices. A sustained rise in oil prices is inextricably linked to growth in food prices. As Ayhan Kose, the World Bank’s deputy chief economist and director of the prospects group, puts it: “Higher oil prices, if sustained, inevitably mean higher food prices. If a severe oil-price shock materialises, it would push up food price inflation that has already been elevated in many developing countries”. According to the World Bank, at the end of 2022, more than 700 million people – nearly one-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,” Kose adds.

Why gold price indicates levels of investor confidence

Gold prices are instructive when it comes to assessing global investor confidence. This is because the price of gold is deeply intertwined with geopolitical concerns – that is, the price will rise in periods of conflict and uncertainty, signalling an erosion in investor confidence. Since the outbreak of the latest widespread violence in the Middle East in the first week of October, Gold prices have risen by around 10 per cent (see chart below). 

Given the risk to food security, the World Bank’s advice is that governments should avoid trade restrictions such as export bans on food and fertilizer as such measures intensify price volatility and heighten food insecurity. Instead, a shrewder move on the part of governments would be to “improve social safety nets, diversify food sources, and increase efficiency in food production and trade”, the World Bank says.

Recent gold prices with the price on the day prior to the outbreak of the latest conflict between Hamas and Israel on 7 October highlighted (Source:

World Bank ‘not considering impact of energy storage’

However, crucially, the World Bank has also said that, in the longer-term, countries can increase their energy security by accelerating the transition to renewable energy sources. This is a key point. Indeed, there is a belief in the energy storage sector, for example, that the World Bank has unwittingly exaggerated its forecast of the possible price shock caused by the Middle East conflict because it has failed to properly account for the potential for renewables and energy storage to satisfy energy requirements.

In a letter distributed to shareholders earlier this month, Avi Brenmiller, CEO of Tel-Aviv stock exchange-listed thermal energy storage company Brenmiller Energy, said: “Amidst current geopolitical tensions, the World Bank’s latest forecasts on oil prices make it abundantly clear that the time for renewable energy is now — and thermal energy storage is at the forefront of this new era.” He added: “We, at Brenmiller, believe they are overestimating the potential price shock by underestimating the enormous ability of renewables and energy storage to meet new demands.”‍

Energy storage becomes more cost-competitive when oil prices rise

Brenmiller said increasing oil prices result in energy storage becoming more cost-competitive. He also drew parallels with the oil crisis of the 1970s, which, Brenmiller said, “catalysed a global quest for energy security, marking the beginning of a major shift toward alternative energy sources.” The 1970s saw the last major global energy crises – driven initially by the members of the Organization of the Petroleum Exporting Countries (OPEC) introducing an oil embargo on a number of industrialised countries in 1973 and then by the Iranian revolution in 1978. Crude oil prices increased four-fold in 1974, then fell back somewhat before almost tripling again in 1979, triggering the early 1980s recession. In the UK for example, over the decade, CPI [consumer price index] inflation and the unemployment rate peaked at 25 per cent and 5.7 per cent, respectively, and the economy fell into recession (with the combination of high inflation and recession leading to the term ‘stagflation’ being coined). The chart below

With concern about global price shocks growing, it is vital that governments around the world – in addition to avoiding food export bans and improving social safety nets – take more steps to facilitate the wider deployment of energy storage. By doing so, they will substantially reduce the impact of increases in oil prices and the associated rise in the price of food, which, as studies have shown, can have devastating impacts, such as increases in political violence and social disorder.

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