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  • Writer's pictureRealFacts Editorial Team

Iran-Israel Conflict: Bank of America Warns of Potential Oil Price Surge

two men cleaning rubble from the Iran-Israel conflict

Bank of America’s global economics team is saying, “So far, events over the weekend have left limited casualties and damage thanks to Israel’s protective defensive shield, allowing some of the geopolitical risk premium in the oil market to reverse,” The looming possibility of direct confrontation between Israel and Iran is casting a formidable shadow over the global oil market, prompting Bank of America analysts to issue dire warnings about potential price surges in the event of escalating anger. They paint a grim picture in which prolonged conflict could drive oil prices up by $30 to $40 per barrel, with Brent crude reaching as high as $130 in the second quarter, while U.S. crude oil prices could soar to $123. This forecast relies on a substantial decrease in Iranian crude oil production, possibly reaching 1.5 million barrels per day, due to the conflict, resulting in a significant supply shock.

Following Iran's recent missile and drone strike on Israel, crude oil prices have already shown a reactive pattern, declining over three consecutive trading sessions. However, the impact has been mitigated, largely due to Israel's robust defensive capabilities, which have effectively minimized casualties and infrastructure damage. While acknowledging this resilience, Bank of America cautions that the initial market response may not fully reflect the medium to long-term economic and geopolitical consequences of Iran's bizarre direct attack on Israel. Despite this initial pause, concerns persist about the potential for broader regional conflict, with analysts highlighting the risk of significant oil supply disruptions extending beyond Iran. If such a scenario materializes, resulting in the loss of 2 million barrels per day or more, oil prices could surge by $50 per barrel, with far-reaching implications for global economic growth and monetary policy, particularly in the United States.

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