Oil Prices Soar: $200 per Barrel No Longer Far-Fetched Amid Global Conflict

The conflict between Iran and Israel has taken a significant turn, with oil prices skyrocketing to unprecedented levels. Analysts are now warning that prices could reach $150 or even $200 per barrel, a scenario that was previously considered far-fetched.

The global benchmark, Brent crude, has hit nearly $120 per barrel and has remained above $100 since March 13. The recent Israeli strike on Iran's South Pars gasfield and subsequent Iranian attacks on oil and gas facilities in Qatar, Saudi Arabia, and the United Arab Emirates have further pushed crude prices up to over $108 per barrel.

The Strait of Hormuz, which accounts for about one-fifth of global oil supplies, has been effectively closed since Iran declared it shut early in the conflict. Only a handful of ships, mostly Indian, Pakistani, Turkish, and Chinese-flagged vessels, have been allowed to pass through in recent days.

Market watchers agree that prices have room to move much higher if the Strait of Hormuz remains closed. Vandana Hari, founder of Vanda Insights, notes that benchmark Middle Eastern crudes have already crossed the $150 threshold, making $200 a possibility.

The International Monetary Fund estimates that every 10% rise in oil prices would correspond with a 0.4% increase in global inflation and a 0.15% reduction in economic growth. Oil prices at $150 or higher would weigh heavily on the global economy.

Adi Imsirovic, an energy expert at the University of Oxford, warns that oil at $200 per barrel would be a major handbrake to the world economy, impacting inflation, growth, employment, and potentially causing shortages of fuel and materials.