A senior Bank of America executive says one commodity is primed to skyrocket in price if the Iran war drags on.
Bank of America’s head of commodities and derivatives research, Francisco Blanch, says that if the war persists, things could get “very, very complicated for oil prices.”
According to Blanch, oil could explode to a price of up to $200 a barrel in such a scenario.
“…if we are still in the same place in May, looking into the third quarter, I’ve already mentioned we could see spikes to a $160 a barrel.
If things keep going, we could see Brent breaking $200 a barrel.”
Brent Crude is trading at $108 at time of writing.
Blanch further says that as a result of the oil supply shock resulting from Iran blocking the Strait of Hormuz, where a fifth of the global oil supply passes through, countries around the globe will be motivated to increase their oil reserves. According to Blanch, this could be bullish for prices over the long term.
“I think the world is going to transform the way we think about commodities more fundamentally. Remember, in the 1990s, Japan pushed for just-in-time [inventory management strategy].
And, in the 2020s, [it] has been China’s just-in-case strategy of inventory accumulation. So they’ve been building up huge oil reserves… …I think this trend only speeds up once the war’s over. And I think that provides support to long-dated commodity prices sooner or later.”
According to Blanch, the oil supply and price shock brought about by the Iran war could trigger an economic recession if it remains unresolved.
“We need to see this war coming to an end, because if we don’t, I think the risks of recession will grow by the week as we head into April…”
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