World Bank warns oil prices could spike to $150/barrel

The World Bank warned that oil prices could rise to $150 a barrel if the war between Hamas and Israel leads to a repeat of the full-scale conflict that the Middle East witnessed 50 years ago.

In the first major assessment of the economic risks of an escalation of the war beyond Gaza’s borders, the World Bank said there was a risk of the cost of crude entering “uncharted waters”.

A “large disruption” scenario comparable with the Arab oil boycott of the West in 1973 would create supply shortages that would push the price of a barrel of oil from about $90 to $140-$157.

The $150/barrel estimate surpasses the previous record level of $147 per barrel — unadjusted for inflation — in 2008.

“If the conflict were to escalate, the global economy would face a dual energy shock for the first time in decades – not just from the war in Ukraine but also from the Middle East,” the bank wrote.

The shock to the global economy would not be confined to energy costs. However, it would also result in hundreds of millions going hungry as a result of increasing food prices, it added.

Under the World Bank’s baseline forecast, oil prices will average $90 per barrel in the current quarter before plunging to an average of $81 a barrel next year as global economic growth slows. But it also mapped out three possible scenarios for oil prices going forward: