Allianz Trade Warns of Possible Oil Price Surge to $140 per Barrel Amid Middle East Tensions

Paris-based Allianz Trade has raised concerns that escalating tensions in the Middle East, particularly the situation between Israel and Hamas, could lead to a significant surge in crude oil prices. According to Ana Boata, the Head of Economic Research at Allianz Trade, this surge could potentially push crude oil prices to as high as $140 per barrel. Currently hovering around $90, such an increase could have far-reaching economic consequences.

Boata emphasized that this surge in oil prices would be a direct impact of the heightened tensions. In a worst-case scenario where oil prices reach such levels, central banks worldwide may hesitate before making decisions on interest rates. This cautious approach could, in turn, lead to a global recession with potential consequences for global growth, potentially reducing it to as low as 2%—a level considered a contraction threshold and half a point lower than the baseline scenario.

While Boata stressed that this is not the baseline scenario, she did assign a 20% probability to this downside scenario. She reiterated that such a situation would lead to substantially higher oil prices. This, in turn, could drive global inflation rates up to 5%.

It is important to note that even before this conflict, many analysts had been revising their forecasts for crude oil prices in 2023. The latest Reuters Oil Poll, conducted in September, showed that 42 economists and analysts expected Brent crude prices to average $84.09 per barrel in 2023. This is up from the consensus projection of $82.45 in August. The situation in the Middle East has added further uncertainty to these projections. It is advised to closely follow reputable news sources and expert analyses for the most up-to-date information on this matter.