Will Oil Prices Reach $160? Pivotal Market Scenarios

SadaNews - The oil market is no longer treating the Iran war merely as a source of geopolitical tension, but as a fully-fledged supply shock.

As the war enters its third week, with the near-total disruption of the Strait of Hormuz continuing, major banks and research institutions have continued to raise their price estimates at a pace that reflects a deeper shift in the prevailing market mood: fear is no longer about whether supplies will be affected, but rather about the extent of the damage, its duration, and who will ultimately bear the costs.

These forecasts come after a jump of over 40% in crude prices since the beginning of the escalation, amid fears of continued disruptions in one of the most important energy corridors through which about one-fifth of global oil and liquefied natural gas supplies pass. For traders, this figure is not just a geographical fact; it is a daily variable in pricing contracts, bets, and risk management.

The sporadic attacks launched by Iran on ships, along with the threat of naval mines, have reduced shipping traffic in the corridor to very limited levels. Additionally, Tehran's targeting of energy facilities in the region has led to reduced production in several countries in the area, resulting in rising petroleum prices from Asia to Europe.

In this report, we highlight the key forecasts from expert houses regarding oil prices:

Citi: Short-term jumps to $120

Citi Group has raised its short-term projections for oil prices, predicting that Brent crude will range between $110 and $120 per barrel in the very near term, amid the continuation of mid-war and the disruption of supply flows through the Strait of Hormuz.

This estimate is based on the assumption that the conflict will be calmed by mid to late April. This represents a revised upward forecast, as the bank previously estimated on March 11 that prices would move within a range of $80 to $100 per barrel over the next week or two.

The bank's analysts, including Max Layton, explained that oil flows could see interruptions ranging from 11 to 16 million barrels per day over the next four to six weeks, compared to about 20 million barrels per day of exports at risk through the strait. They also predicted that the West Texas Intermediate price could reach about $104 per barrel in three months, according to Bloomberg.

More importantly than the numbers themselves is their logic: from the bank's perspective, "the market is likely to continue rising until it reaches a price level, or there is a development in the market that compels the United States to end its military operations, or that the International Energy Agency or OECD countries act to release larger quantities from stocks, or that global military powers intervene to forcibly open the Strait of Hormuz, or that China exerts pressure on Iran to reach an agreement."

However, Citi does not see the crisis as a straight ascent line to infinity. Despite the high estimates in the near term, the bank still expects prices to fall later to a range between $70 and $80 per barrel by the end of the year, meaning that the fundamental bet remains that this shock, despite its severity, will not necessarily turn into a new permanent system in the market.

Iran's War Accounts for a Third of Oil Price

In contrast, Bloomberg Economics provides a more severe characterization in terms of the impact of the duration of the closure. According to its estimates, a one-month closure of the Strait of Hormuz could raise oil prices to around $105 per barrel. If the closure extends to three months, the price could jump to $164.

This significant difference between the two figures is not just a difference in expectation; it is the essence of the entire story. The question now is not only where prices might go, but how long the market can withstand such a disruption before it turns from a commodity crisis to a macroeconomic crisis. Bloomberg Economics estimates that the Iran war is indeed responsible for about a third of the current oil price, with most of this increase occurring after military operations extended to infrastructure and shipping routes faltered. The longer the disruption continues, the higher the chances of fueling inflation and undermining global growth simultaneously.

Bank of America: Divergent Price Paths

Bank of America reads the scene from a slightly different angle. The bank has raised its Brent crude price forecast for 2026 to $77.5 per barrel, compared to a previous estimate of $61 per barrel, noting that the actual disruption in shipping through Hormuz has already blocked nearly 200 million barrels from the market, contributing to a faster-than-expected drawdown of stocks.

The bank foresees two main scenarios that are equally likely: the first involves a quick resolution to the crisis that restores oil flows by April and lowers prices to about $70, while the second involves ongoing disruptions into the second quarter, potentially pushing prices to around $85, according to Reuters.

In a more extreme scenario, the bank estimates that the continuation of the war into the second half of the year could lead Brent crude prices to reach extremely high levels of about $130 per barrel, although the bank's analysts believe this scenario remains unlikely. The bank expects that once the war ends, the oil market will return to experiencing a surplus supply, which could pressure prices to drop to about $65 by 2027.

Standard Chartered: Extended Disruption and Further Increases

The same trend appears in Standard Chartered's estimates, which raised its average Brent price projection for 2026 to $85.5 per barrel, compared to a previous estimate of $70 per barrel, indicating that "despite the optimistic statements from the United States regarding the potential duration of the conflict, there do not seem to be any clear exits at this time."

The bank also raised its quarterly price forecast for crude, predicting that Brent will reach $78 per barrel in the first quarter, up from a previous estimate of $74, before rising further in the second half to $98.

What supports this view, according to the bank, is not only the continuation of the war but also the prolonged damage to the operational structure of the energy market. Even if military operations cease or a ceasefire is declared, the effects of shipping disruptions, insurance costs, logistical bottlenecks, and the redistribution of trade flows are all factors that do not disappear with a quick political decision.

This point specifically makes the current crisis different from many past geopolitical episodes in the oil market. Historically, prices would rise amid fears of supply interruptions and then fall when it became clear that actual flows had not been significantly disrupted. Now, the market is dealing with a tangible disruption in shipping and production, not just a theoretical threat.

In the background, increasing political uncertainty complicates the picture. U.S. statements about the prospect of war remain varied, ranging from talk of soon ending operations to indications that withdrawal is not entirely imminent. These mixed messages do not provide the market with the certainty it needs to price the end of the crisis; rather, they push it to maintain a high risk premium.

U.S. President Donald Trump stated that the United States would soon be ready to end the war. He added during a talk at the White House on Tuesday: "If we leave now, it will take them 10 years to rebuild. But we are not ready to leave yet. However, we will leave in the near future."

At the same time, Kevin Hassett, the White House economic advisor, mentioned in an interview with CNBC on Tuesday that the baseline scenario for the duration of the Iran war ranges between 4 and 6 weeks, noting that current developments are ahead of this timeline, with his expectation of the war ending in the near term.

The bank estimated that between 7.4 and 8.2 million barrels per day of supplies are currently halted in several producing countries, including Iraq, Saudi Arabia, the UAE, Qatar, and Kuwait, along with a decline of about one million barrels per day in Iranian production. It warned that even with the cessation of operations within the conflict or the announcement of a ceasefire, there will be a long-term impact on the energy market disruption.

Escalation Pressures the Market.. $20 More Possible

These estimates come at a time when military developments intersect with market movements. Oil prices fell on Wednesday as Iraq reached an agreement to resume its exports via Turkey, avoiding the Strait of Hormuz, coinciding with the U.S. escalation of efforts to reopen the vital corridor.

Brent crude price fell on Wednesday to below $101 per barrel, after having risen by over 3% the day before. Meanwhile, West Texas Intermediate approached $92 per barrel. However, this decline seemed closer to a breather than a reversal in the overall trend.

Iraq, the second-largest producer in OPEC, had reduced its production to around 1.4 million barrels per day, equivalent to nearly a third of its level before the closure of the strait. Even with finding alternative paths for some shipments, the market still sees that alternatives do not fully compensate for Hormuz's role as a central artery for global energy flows.

The price of the global benchmark has increased by nearly 70% since the beginning of the year, with most of the increase following the U.S.-Israeli attack on Iran at the end of last month.

In normal circumstances, expert houses compete for slight differences in annual estimates. However, in exceptional moments, what drives the market is not averages, but turning points: Will the strait remain closed for another week? Will the strikes expand to more infrastructure? Will additional stocks be drawn? Will alternative corridors be opened quickly enough? These are the questions that have begun to determine the daily price of the barrel, redistributing gains and losses across both importing and exporting economies.

In this context, Robert Renni, head of commodity research at Westpac Banking Group, stated that "in the absence of any end in sight for the fighting, with rising supply stoppages daily, and with the strait effectively closed, we see Brent poised to stabilize within a new higher price range of between $95 and $110 per barrel."

He added: "Should we see targeting of a major refining facility or confirmation of additional mines being laid in the strait, we expect this price range to rise by an additional $10 to $20."