A top executive at Bank of America is warning that one particular commodity could see a significant price surge if the conflict with Iran continues.
Francisco Blanch, who heads Bank of America’s commodities and derivatives research, recently stated that prolonged tensions could lead to a complex situation for oil prices.
Blanch predicts that oil prices could potentially reach as high as $200 per barrel if the situation escalates further.
“If the current situation persists into the third quarter, we could witness spikes up to $160 a barrel. Continued escalation could even push Brent past $200 a barrel,” he added.
As of now, Brent Crude is trading at $108 per barrel.
Blanch also highlighted the potential impact of Iran blocking the Strait of Hormuz, a crucial passage for global oil supply. This disruption could prompt countries to bolster their oil reserves, ultimately driving prices higher in the long term.
“The world may undergo a significant shift in how we view commodities. Just as Japan adopted a just-in-time strategy in the 1990s, China has been accumulating oil reserves as a just-in-case measure. This trend is likely to accelerate post-war, providing sustained support for commodity prices,” Blanch explained.
If the conflict remains unresolved, Blanch warns that the resulting oil supply shock could trigger an economic downturn.
“It is crucial for the conflict to be resolved soon, as prolonged tensions increase the risk of recession as we approach April,” he emphasized.
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Image Source: Midjourney
