Middle East tensions continue to escalate, pushing Brent crude above $119 per barrel on Thursday. According to internal estimates cited by The Wall Street Journal, Saudi Arabian oil officials warn that if supply disruptions linked to Iran persist until the end of April, global oil prices could surge beyond $180 per barrel—a scenario now considered one of Riyadh’s “base cases.”
**Saudi Internal Model: A Stepwise Price Surge Pathway**
Saudi officials’ phased projections indicate that if disruptions continue, oil prices could first test the $130–$140 range in the coming weeks, then gradually climb to $150–$160. Should conflict and shipping constraints remain unresolved by late April, prices may breach the $180 mark.
Specific price trajectory forecasts:
- Near term: $130–$140/barrel
- Early April: ~$150/barrel
- Further escalation: $160–$165/barrel
- Late April scenario: >$180/barrel
Saudi Aramco analysts must assess market dynamics before announcing official selling prices on April 2. Currently, Saudi Light crude shipped from Yanbu on the Red Sea to Asian buyers is trading at $125 per barrel. Officials anticipate worsening spot shortages next week as initial war-related inventories deplete, potentially pushing prices toward $138–$140.
**Goldman Sachs: Extreme Scenarios Could Exceed 2008 Peak of $147**
In a recent report, Goldman Sachs noted that the combination of Iran-related conflict and Gulf shipping disruptions represents an unprecedented supply shock, creating a “clearly skewed upside” risk profile for oil prices through 2027. The bank cautioned that Brent crude could remain above $100 per barrel for an extended period—an outcome it considers increasingly plausible.
**Base Case Scenario** (assuming gradual reopening of the Strait of Hormuz over the coming weeks and restored crude flows starting in April):
- Brent expected to fall to around $70 by Q4 this year
- Contingent on no further major geopolitical disruptions during the recovery phase
**Upside Risk Scenario**:
- If tanker traffic through the Strait remains restricted longer than assumed
- Current pipeline rerouting capacity is insufficient to offset the shortfall
- Upside price risks would intensify sharply
**Extreme Scenario**:
- If the strait remains blocked throughout March or longer
- Brent could surpass the July 2008 record high of $147.25 per barrel
- Prolonged supply risks could even push prices toward the $180–$200 range
**2008 Peak: A Pre-Financial Crisis Benchmark**
In July 2008, WTI crude hit an all-time high of $147.25 per barrel just before the global financial crisis. Goldman Sachs warns that today’s widespread production outages across Gulf states—coupled with uncertain repair timelines—make rapid supply recovery unlikely, keeping prices elevated. Should markets perceive that the U.S. might further restrict crude exports (to secure domestic supply or for strategic reasons), the Brent-WTI spread would likely widen further.
**Demand Destruction and Recession Risks**
Despite short-term fiscal benefits for oil-dependent economies, Saudi officials express deep concern over runaway prices. Analysts at the King Faisal Center for Research and Islamic Studies note that Riyadh generally opposes rapid price spikes, as they risk long-term market instability. The preferred outcome is moderate price increases while maintaining stable market share.
Wood Mackenzie analysts added, “$200 per barrel by 2026 is not impossible.” However, prices at or above $150 could force consumers to permanently reduce oil consumption and potentially trigger a global recession, fundamentally undermining demand.
According to economist surveys, oil at approximately $138 per barrel would raise the probability of a global recession within the next 12 months from the current 32% to over 50%.
