In the summer of 2008, weeks before the implosion of investment bank Lehman Brothers, oil prices soared to nearly $150 per barrel. Some oil market observers are warning about even higher prices this summer if the vital Strait of Hormuz does not reopen soon.
US oil prices have already risen from around $65 to around $100 since the start of the war in the Middle East. the second largest monthly increase since the launch of futures trading in 1983.
Meanwhile, gas prices have surpassed $4 per gallon nationally and will likely increase the cost of everything,
President Donald Trump on Tuesday insisted that But if the war does not end soon, some oil analysts warn that a prolonged conflict and failure to reopen the Strait of Hormuz will be very costly.
If the war lasts until June, oil prices will likely would rise above US$200 per barrel “for a while”, according to research recently published by Australian investment bank Macquarie Group.
Vikas Dwivedi, global oil and gas strategist at Macquarie, told CNN International on Wednesday (1st) which is approximately 20% chance this happens, down from 40% at the end of last week.
He said $200 oil is possible even if the war ends but the Strait of Hormuz remains mostly closed, a situation Trump recently mentioned.
“President Trump and his entire energy team have a plan in place to mitigate any short-term disruptions to energy markets and have continued to act quickly when necessary,” White House spokeswoman Taylor Rogers said in a statement.
Higher prices balance the market
If oil hits $200, it would hurt the global economy. This would translate to gasoline prices of approximately $7 per gallon in the U.S., breaking the previous record of $5.02 set in June 2022.
While oil at $200 seems extreme, they pointed to the fact that Dubai oil prices recently surpassed $166 per barrel.
The reasoning is that if oil doesn’t start flowing out of the Middle East soon, prices would have to rise enough to balance the market, crushing demand.
In 2008, this level was almost US$150 per barrel. Adjusted for inflation, it could be over $200.
“The price will reach whatever level it takes to slow down GDP,” Bob McNally, president and founder of Rapidan Energy Group, told CNN International in a telephone interview.
“Nobody knows exactly what that level is, but I think high $100 or even more than $200 is reasonable, unfortunately.”
Epic supply outage
The clock is ticking to resolve the biggest oil supply disruption in history.
Bank of America estimates that in March alone, the world economy lost about 14 million to 15 million barrels per day of crude oil and energy products like diesel and jet fuel.
The bank expects oil prices to hover around $100 per barrel for the rest of the year – and could rise further if the closure of the Strait of Hormuz continues to disrupt energy supplies.
“If most of these energy flows are not restored within the next two to four weeks, we believe a collapse of the global oil supply chain would be inevitable,” Bank of America analysts wrote in a report on Wednesday.
and could trigger “consequences reminiscent of, or possibly worse than, the energy crises of the 1970s,” the bank said.
Bank of America estimates that a “prolonged” loss of supply would likely push oil prices above $150 per barrel this quarter.
Political changes ruin predictions
Of course, all these predictions should be taken with caution.
as “irrelevant because they cannot reliably predict military progress and when this operation will be completed.”
Trump’s implementation of tariffs last year shows how quickly economic forecasts can become irrelevant due to policy changes from the White House.
Last April, economists and investors braced for a looming recession after Trump imposed historically high tariffs on imports. Shares plummeted. Bond yields soared.
But that recession never came. Trump backed off, pausing and watering down many of these tariffs in response to extreme market pressure.
Fast forward to today, and it’s easy to see how oil prices could fall dramatically if the Strait of Hormuz reopens soon and energy infrastructure in the Middle East is repaired quickly.
Even just a U.S. exit from the conflict would likely cause at least a short-term drop in oil prices, analysts say.
“All I have to do is leave Iran, and we will do that very soon, and they will come down,” Trump said on Tuesday.
All eyes on the Strait of Hormuz
Bank of America presented three scenarios for where oil prices will go next.
If there is a “rapid de-escalation” in the Middle East, Bank of America expects Brent crude to average just $77.50 per barrel in 2026.
In a second, more likely scenario, the end of the war in two to four weeks would translate into an average of $92.50 per barrel this year. That would mean high prices, but not a nightmare for the economy.
In its most severe scenario, Bank of America sees a “triple whammy” of near-zero real income growth for consumers, job losses and stock market turmoil.
“The escalation scenario could push the US economy into a recession within months,” Bank of America said.
The Trump administration has taken drastic steps aimed at alleviating supply shortages, including releasing a historic amount of oil from emergency reserves, pledging to support marine insurance and temporarily lifting limits on the transportation of oil, gasoline and other commodities across the United States.
“The tools that President Trump used are good. They’re just too small,” said McNally, a former energy adviser to President George W. Bush.
for the president’s toolkit to resolve.”
*Translation revised by André Vasconcelos
