Oil prices face the risk of surging to $150 per barrel if Middle East conflicts widen, according to Mohamed El-Erian, despite President Donald Trump ruling out an immediate U.S. military strike against Iran.
The Path to $150 Crude
During a recent podcast interview with Mario Nafwal, El-Erian stated that if a broader war breaks out and disrupts tanker flows in the Straits and the Red Sea, prices will climb significantly. “This is not oil at 120. This is oil at 150 because we don’t have these two other things that we had before,” El-Erian said.
He explained that the market previously avoided $150 oil because China cut its imports by 40% and relied heavily on both sovereign and company inventories. With those global inventories now drawn down, El-Erian stated that the market lacks its prior buffers.
Trump Rules Out Immediate Strike
El-Erian’s warning comes amid short-term market relief following recent comments from President Trump. Speaking to reporters outside the White House on Sunday, Oct. 25, Trump stated that the U.S. would not immediately attack Iran.
“The answer is no,” Trump said. “There will not be a strike today.”
Following Trump’s remarks, oil prices retreated. However, tensions remain high, as U.S. diplomatic missions across the Middle East have tightened security due to intelligence warnings of Iranian plots, and the Pentagon has reportedly prepared options for follow-up strikes.
Economic Tipping Points
Despite the immediate drop in oil prices, El-Erian cautioned that a prolonged conflict would serve as a “major headwind” for the global economy, particularly as borrowing costs remain elevated.
El-Erian noted that recent market stability has been built on “borrowed resilience,” as nations drew down existing inventories and financial wealth. “You can’t keep on borrowing from inventories all the time,” El-Erian stated.
If these buffers fail during a prolonged military conflict, El-Erian concluded that the resulting energy shock would deliver a “significant blow” to the global economy and “undermine the marketplace.”
Oil Prices Ease
At the last check, WTI crude oil futures were trading lower in the early New York session by 2.06% to hover around $101.14 per barrel. Meanwhile, the ETF tracking this, United States Oil Fund LP (NYSE:USO), fell by 2.51% in premarket trading on Monday.
Similarly, Brent crude oil futures fell by 1.42% to $110.11, and the ETF tracking it, United States Brent Oil Fund LP (NYSE:BNO), dropped by 1.87% in premarket trading on Monday.
On the other hand, U.S. stock futures advanced on Monday, as the Dow Jones was 0.36% higher, the Nasdaq 100 rose 0.56%, and the S&P 500 index rose by 0.35%, following Friday’s lower close.
On Friday, the SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 and Nasdaq-100, respectively, closed lower. SPY fell 0.52% to $759.97, while QQQ declined 0.01% to $704.40. Meanwhile, the Dow tracker, State Street SPDR Dow Jones Industrial Average ETF Trust (NYSE:DIA), ended 1.24% lower at $521.37.
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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