World Bank warns of $157 oil price if Gaza conflict escalates

investmentweek.co.uk:

According to its forecasts, its baseline case is for oil prices are expected to average $90 a barrel in the current quarter before declining to an average of $81 a barrel next year as global economic growth slows.

In its quarterly Commodity Markets Outlook, the research group said the current conflict in the region could «push global commodity markets into unchartered waters», although the affects of the war so far have been «limited» on global commodity markets.

The World Bank said because the latest instalment of the drawn-out clash between Israel and the Palestinian group Hamas comes on top of the price pressure created by Russia's invasion of Ukraine last year.

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According to its forecasts, its baseline case is for oil prices are expected to average $90 a barrel in the current quarter before declining to an average of $81 a barrel next year as global economic growth slows.

But, in the "'small disruption' scenario", which refers to the fighting escalating the global oil supply would be reduced by 500,000 to 2 million barrels per day—roughly equivalent to the reduction seen during the Libyan civil war in 2011.

Under this scenario, the oil price would initially increase between 3% and 13% relative to the average for the current quarter, to a range of $93 to $102 a barrel.

The "'medium term' scenario'" which the Bank said was «roughly equivalent to the Iraq war in 2003» would drive oil prices up by 21-35% to hit $109 and $121 a barrel.

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In the worst case scenario where the war escalates even further and enters the «large disruption» scenario, «comparable to the