How Regional Conflicts Are Reshaping Global Oil Prices
As tensions escalate between two regional powers in the Middle East, energy security returns to the forefront, with growing concerns over the direct impact on global oil supply stability. The conflict between Iran and the occupying state has moved beyond mere military posturing, evolving into an international state of watchfulness amid rising fears of a shock to global markets.
In this context, BMI – a division of Fitch Solutions – offers a deep analysis of the oil price outlook, based on daily-updated data and long-term models tracking geopolitical and economic variables influencing the market. The company's latest report is considered one of the most comprehensive assessments of how this conflict could shape the global energy landscape, especially through a set of divergent scenarios for oil price trajectories.
Possible Scenarios and Oil Prices
BMI outlines five scenarios in which the price of Brent crude could range between $60 and $150 per barrel, depending on the severity of the escalation:
Scenario 1 – Limited Retaliation with Diplomatic Openings:
A limited Iranian response combined with openness to a U.S.-brokered nuclear deal could bring prices down to $60–65 per barrel.
Scenario 2 – Nuclear Program Stalls without Agreement:
A weakened Iranian nuclear program without a new deal would likely keep prices between $60–70 per barrel.
Scenario 3 – Controlled Escalation Followed by De-escalation:
A cycle of mutual strikes with Israel followed by gradual de-escalation would maintain prices in the range of $60–80 per barrel.
Scenario 4 – Military Confrontation Involving the U.S.:
Escalation against Israel that draws in the United States militarily could drive prices up to $75–100 per barrel.
Scenario 5 – Full-scale Conflict and Hormuz Disruption:
A direct and extensive clash between Iran and the U.S., particularly involving the closure of the Strait of Hormuz, may push prices to $100–150 per barrel.
Estimates suggest that an open conflict could trigger significant economic disruptions, including a slowdown in global growth and a surge in inflation. Conversely, a partial de-escalation could help stabilize prices without major shocks.
Despite the various scenarios, BMI leans toward a forecast of limited, non-expansive hostilities, allowing for greater international flexibility in managing the crisis and giving involved parties space to reassess their strategic decisions before crossing into broader conflict.
The report also points to obstacles facing a strong Iranian response, largely due to military and political constraints. Additionally, regional players like Hezbollah and the Houthis are not expected to play a significant role at this stage, reducing the likelihood of a wider escalation.
On the diplomatic front, there remains a possibility that Iran could be compelled to return to nuclear negotiations, which could lead to a lift in sanctions and an increase in its oil exports. However, BMI views this scenario as unlikely in the near term due to internal political pressures that would make such a concession difficult for Tehran.
Overall, oil prices and energy markets remain vulnerable to volatility amid a highly unstable political environment, with oil acting as a sensitive barometer reflecting every field development or diplomatic signal. As investors continue to monitor the situation closely, the future of oil prices hinges on the next move in the conflict.
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