A wizard's staff has a knob on the end
I'd reckon that the staff was a conduit for the wizards' power, and a badge of office as well.
Gandalf seems to have brought down the Bridge at Khazad-Dum by breaking his staff upon it - perhaps a conduit for Gandalf's power, perhaps using some 'energy' stored within the staff - its difficult to tell. As well as hewing the Balrog with Glamdring it seems clear that there was serious spell-casting in the Battle of the Peak, so Gandalf could still do magic without the staff. Maybe Gandalf's death was even caused by utter magical exhaustion rather than physical wounds, and maube he would have fared better with his staff - speculation though!
As far as I remember the staves were issued in Valinor, so are likely pretty special!
Oh, and remember the to-do about Gandalf's staff at Edoras, though the assumption that Wizards required the staff appears wrong.
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Rumil of Coedhirion
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