Westpac has warned clients that oil prices could surge towards $US150 a barrel in the first half of next year if the Iran conflict continues to intensify, despite a recovery in exports in recent weeks.
That would imply a 38 per cent spike in Brent crude, the global benchmark, from current levels of around $US110 a barrel on Wednesday. On Tuesday, oil hit $US112 a barrel, its highest level in five months.
Renewed hostilities in the Persian Gulf, including the Houthis’ attack on energy infrastructure in Saudi Arabia, the world’s third-largest oil exporter, have pushed prices higher in recent weeks.
Westpac head of business and industry economics Sian Fenner warned that if the US and Iran failed to reach an agreement to end the months long war by next year, it risked a “deeper and more prolonged global deficit” in the world’s oil supply.
The bank said that further violence following the US midterm elections in November was a near-term risk for higher oil prices.
“Talks are still ongoing in the background, with the US and Iran exchanging proposals to reopen the strait, but the gap between them remains wide,” Fenner said.
US President Donald Trump has ruled out strikes on Iran before the election, but Citi head of international government affairs Sarah English said that attacks were likely to resume after the vote.