The World Bank predicts that if the Middle East war intensifies, oil prices might reach more than $150 per barrel.
A protracted conflict in the area may result in significant increases in food and energy costs, particularly one year after prices surged as a result of Russia’s invasion of Ukraine.
As of right moment, oil prices are expected to decline and are stable at roughly $90 per barrel.
The Bank cautions that this prognosis could change rapidly, though.
In the worst-case scenario, according to the World Bank, events could unfold that are akin to the oil crisis of the 1970s, driving up the price of oil to between $140 and $157 per barrel.
Oil-producing Arab states stopped exporting to the United States and other nations who backed Israel during the Yom Kippur War in October 1973. Prices shot through the roof.
According to Indermit Gill, chief economist at the World Bank, “the latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s – Russia’s war with Ukraine.” “That had disruptive effects on the global economy that persist to this day.”
He went on to say that since there had not been a “dual energy shock” that affected both the supply of gas and oil in decades, policymakers would need to exercise caution.
This month, European gas prices surged as investors were concerned that pipeline problems close to the Gaza Strip may affect worldwide supplies.
Nonetheless, the impact of the fighting has so far mostly been ignored by the oil markets.
On Monday, benchmark Brent prices dropped more than 1% to almost $89 per barrel.
Right now, the consensus is that wholesale prices will drop to $81 per barrel if the Middle East issue does not get worse.