Oil prices might soar to unprecedented levels, potentially hitting $200 per barrel if the ongoing conflict in Iran continues past the end of June, according to experts from Macquarie Group. In a recent client note, the strategists warned that an extended war scenario could necessitate a significant price increase to “destroy an historically large amount of global oil demand.” This scenario, they project, could see Brent crude prices escalate above $200 per barrel, with U.S. gasoline prices potentially climbing to approximately $7 per gallon.
As of Friday, Brent futures were trading above $104 per barrel, maintaining a gain of about 3% for the day. This uptick follows President Trump’s decision to delay his deadline for targeting Iranian domestic power infrastructure for the second time. Meanwhile, the U.S. benchmark WTI crude was also trending upward, trading above $96 per barrel.
Earlier in the conflict, both Brent and WTI crude prices had surged to levels not observed since the early months of 2022, largely influenced by the geopolitical turmoil following the Russian invasion of Ukraine. Vikas Dwivedi and his team at Macquarie assigned a notable 40% probability to the more aggressive prediction of $200 per barrel oil, suggesting a more probable outcome would involve the war concluding by the beginning of April. In such a scenario, they anticipate oil prices would stabilize, economic impacts would be minimal, and global growth would only experience slight deceleration.
The strategists commented on the market’s expectations, indicating a prevailing belief that President Trump would soon announce a victory. They noted that oil and gas futures are currently in a backwardated market, implying that present prices reflect anticipated future declines. However, they cautioned that uncertainty surrounding the definition of victory, coupled with recent attacks on energy infrastructure, presents a risk of rising prices as a trigger for negotiating a near-term resolution.
