(Investing) – The war between Iran and the United States could last far longer than policymakers anticipated, raising the likelihood of oil prices breaking past previous crisis peaks, according to RBC Capital.
Helima Croft, RBC’s head of global commodity strategy, wrote that conversations in Washington have prompted the bank to revise its expectations for both the duration of the conflict and its market impact.
“A number of experts have suggested that a combination of expanded U.S. war aims as well as Iranian asymmetric capabilities… could prolong the conflict well into the spring,” Croft said.
RBC now believes oil prices could climb above the 2022 Russia-Ukraine highs if the conflict continues for several more weeks.
Croft wrote that “we believe that we will exceed the Russia/Ukraine oil price highs of $128/bbl in 2022 if the war continues for another three to four weeks.”
If fighting stretches for several more months, Croft believes prices could surpass the 2008 record of $146 a barrel.
The bank said the White House initially expected a short conflict but is now weighing more complex options, including potentially sending ground troops to secure enriched uranium at the Isfahan reactor.
Croft also warned that Iran retains ample short-range missile, drone and naval mine capabilities, noting that “the Shahed drones are vastly cheaper than interceptors being deployed against them,” allowing Iran to sustain attacks even if the U.S. seeks an early exit.
RBC states that the emerging “war of attrition” scenario significantly increases upside risks for crude prices.
