An escalation of the Iran crisis could push oil prices up to $200 (£127) a barrel, comes the warning from one of Europe’s largest financial services providers Erste Group.
The price of Brent crude reached an all-time average high of $111 per barrel in 2011 and Erste Group believes the low interest rate environment, along with escalating issues with Iran, could push prices higher still.
“As the Federal Reserve is now prepared to continue its zero-interest policy until the end of 2014, this should be supportive of the entire commodities sector, but especially of oil and gold,” warns the group. “The foundation for new all-time highs has been laid.”
It adds: “In Europe, the higher oil prices may soon be having an impact on the economy. In euro, the price of Brent has already reached new all-time highs.”
The halt to production forced by Libya’s civil war contributed to a 25% increase in the price of Brent, according to Erste. (article continues below)
While Libya only accounts for 2% of global production, it remains to be seen what impact political instability will have on Iran, the third-largest oil-exporting country in the world.
“Even just a short blockage of the Strait of Hormuz would have dramatic effects. The oil price would certainly rise to new all-time highs, as 20% of global oil production is transported through this maritime eye of a needle,” says Ronald Stoeferle, a commodity expert at Erste Group.
Equally, other global oil producers are requiring ever higher margins to achieve balanced budgets. Saudi Arabia will needs a minimum oil price of $80 this year while Russia needs closer to $126 a barrel.