Oil prices could hit $150 if Israel-Hamas conflict intensifies, World Bank warns

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Crude prices could rise to more than $150 a barrel if the conflict in the Middle East escalates, the World Bank warned on Monday, risking a repeat of the 1970s oil price shock if key producers cut supplies.

In its quarterly Commodities Markets Outlook, the multilateral lender said a prolonged Israel-Hamas conflict could drive big rises in energy and food prices in a “dual shock” for commodity markets still reeling from Russia’s full-scale invasion of Ukraine.

“The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s — Russia’s war with Ukraine,” said Indermit Gill, the World Bank’s chief economist and senior vice-president for development economics.

Under the bank’s baseline forecasts, overall commodity prices are predicted to fall 4.1 per cent in the next year, with oil prices declining to an average of $81 a barrel, down from a projected $90 a barrel in the current quarter, as economic growth slows.

However, the report said this outlook could quickly reverse if the conflict in the Middle East intensifies. In a worst-case scenario, global oil supply could shrink by 6mn to 8mn barrels a day, sending prices to between $140 and $157 a barrel, if leading Arab producers such as Saudi Arabia moved to cut exports.

Under small and medium disruption scenarios, prices could hit $102 to $121 a barrel, the report added. Current global oil demand is about 102mn b/d.

The war began when Hamas launched cross-border attacks from Gaza on October 7, killing more than 1,400 people and taking more than 230 hostages, according to Israeli officials. The Israeli bombardment has killed more than 8,000 people in Gaza and injured more than 20,000, according to Palestinian officials.

The conflict threatens to spread beyond Israel and the occupied Palestinian territories, with energy analysts warning that global…