The global economy is bracing itself for a severe downturn, potentially marked by years of oil prices soaring to $150 per barrel, largely influenced by the ongoing conflict in Iran. This grim forecast comes from the head of the largest asset management firm worldwide, who highlights the significant economic repercussions this situation could trigger.

Adding to the concerns, Shell’s CEO has issued a stark warning about Europe’s looming fuel shortages, which could hit as soon as next month if the Strait of Hormuz remains shut. This crucial maritime route, a vital artery for nearly 20% of the world’s gas and crude supply, is currently blocked, exacerbating the global oil and gas crunch. Already, parts of Asia have been compelled to curtail energy use, setting off a ‘ripple effect’ that threatens to extend westward.

The blockage of the Persian Gulf channel has sent Brent crude prices skyrocketing, reaching heights not seen in almost four years, with prices nearing $120 per barrel at one point.

In a conversation with the BBC, Larry Fink, the CEO of BlackRock, shared his insights on the potential outcomes of this conflict. He outlined two possible scenarios, emphasizing the uncertainty surrounding the situation.

In an optimistic scenario where the conflict resolves swiftly, oil prices might revert to their pre-conflict levels, approximately $70 per barrel. However, Fink warns that a prolonged conflict or a continued threat from Iran, particularly concerning trade and the stability of the Strait of Hormuz and the Gulf Cooperation Council region, could result in sustained high oil prices, potentially hovering between $100 and $150 per barrel. Such a scenario poses significant economic challenges.

But If the war is drawn out, or if there is a cessation and ‘yet Iran remains a threat, a threat to trade, a threat to the Strait of Hormuz, a threat to this peaceful coexistence of the GCC region, then I would argue that we could have years of above $100 closer to $150 oil which has profound implications in the economy’.

On Monday, Donald Trump said he had conducted ‘very good and productive conversations’ talks with Tehran – insisting the two sides had ‘major points of agreement’ – which brought Brent crude prices down 10 per cent to around $100. 

But the Islamic Republic has denied that a peace process is taking place, with a military spokesman insisting that the US is ‘negotiating with itself’, adding: ‘Someone like us will never come to terms with someone like you.’

Washington has also dispatched more than 4,000 US marines to the region, and military officials are weighing up the deployment of a combat brigade from the Army’s 82nd Airborne Division – signifying an escalation of the war. 

A plume of smoke and a fragment of concrete rise from the site of an Israeli airstrike on the eastern outskirts of Tyre, in southern Lebanon, on March 24

Rocket trails are seen in the sky above the Israeli coastal city of Netanya amid a fresh barrage of Iranian missile attacks on March 25

While Trump may want to de-escalate the conflict to stabilise energy prices, prices are still hovering at $100 as markets grow increasingly unconvinced the war will end soon. 

‘We will have global recession,’ Fink claimed, when asked what would happen if oil stays at $150 a barrel as the Middle East crisis deepens.

With fuel shortages looming, Wael Sawan, CEO of Shell, warned that European governments may need to urgently curb energy demand – a measure not taken since the 2022 crisis amid the Russian invasion of Ukraine. 

Israel and Iran continued to exchange strikes last night, with the IDF saying it had attacked two key sites used to develop long-range naval cruise missiles in the capital Tehran. 

In Lebanon, Israeli strikes killed at least six people in the southern Sidon area on Wednesday, with the health ministry saying four people died in an ‘Israeli enemy raid’ on the town of Adloun, and another two in an apartment in the Mieh Mieh refugee camp.

Economists have warned that recession and stagflation –  the combination of higher inflation and unemployment, and stagnating growth – risks are rising because of the war. 

The conflict has caused wild swings in markets, as investors grapple with the ramifications for global supply chains. 

Last week, Deutsche Bank said: ‘Investors are increasingly pricing in a more protracted conflict that causes extensive economic damage’. 

The longer there is disruption to shipping routes and energy infrastructure across the region, the less likely the damage is temporary.  

Smoke and flames rise at the site of airstrikes on an oil depot in Tehran on March 7

Massive explosions over Tel Aviv as Iran launches surgical missile strike, February 28

Blackrock CEO Larry Fink has said rising oil prices will have global repercussions

The outlook hasn’t been helped by comments made by the International Energy Agency (IEA), which has called the conflict the ‘largest supply disruption in the history of the global oil market’. 

On Monday, Fatih Birol, the IEA’s executive director, said that hat the severe damage to at least 40 energy sites meant that even an end to the conflict would not immediately restore oil supply.

Rising oil and gas prices will soon start to filter through to household energy bills because the UK relies on imports. 

Fink said ‘Rising energy prices is a very regressive tax. It affects the poor more than the wealthy.’

Energy experts have called on the Government to allow the domestic production of oil and gas or risk further price shocks.

Fink said countries should not rely on one source of energy, and that if oil prices rise to $150 ‘you would have so many countries moving so rapidly towards solar and maybe even wind’.

He added: ‘Use what you have unquestionably, but also aggressively move towards alternative sources too.’

This is a developing story

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