The World Bank is warning that even a small disruption to crude supplies due to escalating Middle Eastern conflict could remove between 500,000 and 2 million barrels a day from global markets.
If that happens, prices could rise to between $93 and $102 a barrel, the bank said in a report Monday. The outlook could “darken quickly” if the latest conflict widens its scope, with a medium-sized disruption of 3 to 5 million barrels a day driving prices as high as $121 a barrel.
The biggest potential disruption foreseen by the bank could remove 6 to 8 million barrels of oil per day, comparable in magnitude to the 1973 Arab oil embargo. That worst-case scenario could see prices reach $157 a barrel.
So far, the Israel-Hamas war has had minimal impact on the oil market, which “may reflect the global economy’s improved ability to absorb oil price shocks,” according to the report. The energy crisis of the 1970s led many countries to reinforce their defenses against price volatility by reducing their dependence on oil, tapping into expanded energy resources and establishing strategic petroleum reserves, among other measures.
Under the bank’s baseline forecast, oil prices are slated to average $90 a barrel in the current quarter before declining to an average of $81 a barrel next year amid lagging global economic growth. Overall commodity prices are projected to fall 4.1% next year before stabilizing in 2025.