Oil Prices Are at a Four-Year High—and Some Experts Warn of a Possible Recession

Key Takeaways

• Oil prices were around $100 a barrel today as the war in Iran continued to disrupt global oil flows and production throughout the Middle East.
• Persistent oil price pressures could aggravate inflation and detract from economic growth; some analysts say its possible prices climb to levels that could tip the U.S. into a recession.

The price of oil continued to surge Monday as the war in Iran stretched into its second week, raising questions about its effect on consumers, markets and the global economy.

Oil futures jumped to a nearly four-year high Sunday evening. Brent crude, the global benchmark, and West Texas Intermediate, the U.S. benchmark, both approached $120 a barrel overnight before retreating to around $100 on Monday morning. Oil prices are up about 40% since the U.S. and Israel began strikes late last month.

Iran has launched missile and drone strikes on oil infrastructure in neighboring countries—and all but shut down the Strait of Hormuz, through which about a fifth of the world’s oil and liquefied natural gas passes on its way out of the Middle East. Over the weekend, some U.S. and Israeli strikes targeted energy assets in Iran.

Why This Matters

While the U.S. economy is more insulated from oil price shocks now than it once was, experts say a persistent rise in prices still threatens to slow growth and boost inflation. Those pressures could compound the stresses of a shaky labor market and uncertainty about AI-driven disruption.

Bank of America analysts in a note on Friday warned that a persistent rise in oil prices above $100 a barrel “would probably take more than 60 [basis points] off GDP growth.” A sustained period of high prices, they wrote, could aggravate inflation, pressuring low-income consumers, and weigh on the stock market, tightening financial conditions for the high-income consumers who have recently been propping up the economy.

BofA sees even greater risk if prices continue to climb. “A doubling in oil prices, unlikely as it seems, could cause a recession,” the analysts wrote. Prices would need to rise another 45% to about $140 a barrel to have doubled since the start of the war.

Analysts at Maquarie reportedly warned in a note on Monday that Iran’s closure of the Strait of Hormuz, if it lasts a few more weeks, could push oil prices to $150 a barrel. Other experts have forecast less severe outcomes. Analysts at Rystad Energy said it would take a four-month disruption to nudge prices as high as $135. Prices would likely top out at $110 in the event of a two-month crisis, they said.

Related Education

What Determines Oil Prices?

Here’s What Experts Think About the Economy—and Markets—as War in Iran Continues

Oil producers in the United Arab Emirates, Kuwait, and Iraq—among the world’s largest exporters—have begun cutting production to avoid filling storage facilities to capacity. Saudi Arabia has reportedly begun adjusting production levels and redirecting crude to export facilities on the Red Sea to bypass the Strait of Hormuz. Finance ministers from the Group of 7 said after a meeting Monday they could release oil from their strategic reserves to offset disruptions.

U.S. consumers are seeing the impact of higher oil prices. The national average gas price has risen 16% in the past week, its sharpest rise since Russia invaded Ukraine in early 2022.

Rising gas prices could add pressure on the Trump administration to dial down tensions in the Middle East. Oil price shocks factor into consumer prices directly in the form of higher prices at the pump, and indirectly by raising shipping costs. The cost of living is expected to be a key issue for voters in November’s midterm elections, which could determine control of Congress and, thus, whether Democrats can push back on President Donald Trump’s domestic and foreign policy agendas.

Higher oil prices are also weighing on the stocks of companies for which fuel is a major cost and global instability a headwind to demand. United Airlines (UAL) and Delta Airlines (DAL) are down about 20% and 14%, respectively, since the war began. Carnival Corp. (CCL) and Norwegian Cruise Line Holdings (NCLH) have both lost more than 20% of their value over the same period.

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