The escalating conflict between Israel and Gaza, along with the Russia-Ukraine war, could prompt a significant surge in oil prices, according to the World Bank. The bank has outlined three possible scenarios that could see oil prices reach as high as $157 per barrel in the event of a large disruption. This situation mirrors the 1973 Arab oil embargo, which led to a global supply drop of 6-8% and an initial price increase of 56-75%.
Under medium and small disruption scenarios, prices could rise to between $109-$121 and $93-$102 per barrel respectively. These developments risk a dual energy shock that could further strain the global economy, particularly amid expectations of a worldwide economic slowdown.
For the fourth quarter of 2023, the World Bank's baseline forecast predicts oil prices averaging at $90 per barrel. This is expected to decrease to $81 per barrel by next year. On the other hand, Goldman Sachs anticipates oil reaching $100 per barrel by June 2024. Similarly, UBS predicts Brent crude trading between $90 and $100 over the next year.
All these estimates underscore the potential volatility in the oil market due to geopolitical tensions. As such, they serve as a stark reminder of the interconnectedness of global conflicts and economic stability.
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