Introduction#
RBC Capital Markets has raised concerns that the conflict between Iran and the United States may last longer than initially expected. This could lead to a significant increase in oil prices, surpassing previous crisis levels.
Extended Conflict Anticipated#
Helima Croft, RBC’s head of global commodity strategy, indicated that discussions in Washington have led to a reassessment of how long the conflict might continue and its potential impact on the oil market. Experts suggest that a combination of expanded U.S. military objectives and Iran's capabilities could extend the conflict well into spring.
Oil Price Projections#
RBC now forecasts that if the conflict persists for several more weeks, oil prices could exceed the previous highs seen during the Russia-Ukraine crisis, which reached $128 per barrel in 2022. Croft stated, "We believe that we will exceed the Russia/Ukraine oil price highs if the war continues for another three to four weeks."
Potential for Record Prices#
If the fighting continues for several months, there is a possibility that prices could surpass the all-time high of $146 per barrel set in 2008. The White House had initially anticipated a brief conflict but is now considering more complex military strategies, including the deployment of ground troops to secure sensitive locations in Iran.
Risks and Capabilities#
Croft also highlighted that Iran possesses significant military capabilities, including short-range missiles and drones, which could sustain its attacks. She noted that the cost-effectiveness of these drones compared to the defense systems used against them allows Iran to maintain pressure even if the U.S. seeks a swift resolution. RBC's analysis suggests that the current situation could lead to a prolonged “war of attrition,” increasing the likelihood of higher crude oil prices.