Oil Could Hit $120 in Worst-Case Iran Conflict Scenario

Oil prices could surge to $120 per barrel if the conflict between the United States, Israel, and Iran becomes prolonged, according to a new analysis.

With West Texas Intermediate crude currently trading around $70 per barrel for April delivery, a protracted conflict could trigger a roughly 70% price spike. Such a surge would raise production costs, drive up inflation, and dampen corporate investment and household consumption—a phenomenon known as stagflation.

Hana Securities released a report on the 3rd outlining scenarios for the conflict. The worst case involves a complete blockade of the Strait of Hormuz and expansion of hostilities to neighboring countries. The best-case scenario envisions diplomatic solutions resuming after brief clashes, while the base case projects one to two months of military tensions with reduced shipping through the strait.

The Strait of Hormuz, through which approximately 20% of global seaborne oil transits, is known as the "global energy artery." It serves as the critical maritime route for crude oil and natural gas from Middle Eastern producers to Asia and Europe. Any disruption to shipping through the strait would inevitably trigger supply concerns and price spikes.

Hana Securities projected WTI could reach $120 per barrel in the worst case, where Iran completely blockades the strait and strikes refining facilities in neighboring countries. Under the base-case scenario, WTI would rise to $90 per barrel.

Following attacks by the United States and Israel, Iran initiated a full blockade of the Strait of Hormuz, declaring it would "burn all vessels attempting to pass through the strait."

If the blockade persists, OPEC and the OPEC+ alliance of oil-producing nations could increase production. However, significantly ramping up output in the short term remains difficult, making higher oil prices inevitable.

International oil prices are already climbing to reflect elevated risks. On the 2nd, Brent crude futures for May delivery closed at $77.74 per barrel on the ICE Futures Exchange, up 6.7% from the previous session. Brent futures briefly surged 13% to $82.37 per barrel during trading, reaching their highest level in over a year since January last year.

WTI futures for April delivery closed at $71.23 per barrel on the New York Mercantile Exchange, up 6.3%. WTI also briefly spiked 12% to $75.33 per barrel during the session, hitting the highest level since June last year.