$200 oil fears: US weighs worst-case risks even as White House denies concern
A Bloomberg report said this was part of internal assessments aimed at preparing for extreme scenarios, which was dismissed by White House spokesman Kush Desai as being “false”
US officials are assessing the potential economic fallout from a sharp rise in global oil prices as tensions linked to the Iran conflict continue to unsettle energy markets, according to a Bloomberg report.
The internal exercise, cited by a report in moneycontrol based on sources familiar with the matter, is aimed at evaluating extreme scenarios, including the possibility of crude prices rising to as high as $200 per barrel, and their likely impact on inflation and economic growth. The report emphasised that the modelling is precautionary rather than a formal forecast.
The White House, however, has pushed back against the claims. Spokesman Kush Desai dismissed the report, saying officials are not examining the likelihood of oil reaching $200 per barrel and that Treasury Secretary Scott Bessent has not expressed concern over short-term supply disruptions. He added that the administration remains confident in the long-term outlook for the US economy and global energy markets.
According to the Bloomberg report, oil prices have already risen sharply following military strikes by the United States and Israel on Iran on 28 February. US benchmark crude has gained around 30 per cent, while global benchmark Brent has climbed nearly 40 per cent, reflecting growing fears of supply disruptions.
A major concern highlighted in the report is the vulnerability of key maritime routes such as the Strait of Hormuz, through which a significant share of the world’s oil supply passes. Any prolonged disruption in this corridor could further tighten global markets.
Analysts cited by Bloomberg warned that a sustained spike in oil prices could have far-reaching economic consequences. In inflation-adjusted terms, crude has approached the $200-per-barrel mark only once in recent decades, in the lead-up to the 2008 financial crisis.
Even lower price levels could have a substantial impact. Estimates referenced in the report suggest that oil at around $170 per barrel for several months could push up inflation in major economies while dampening growth.
Central banks are already factoring in rising energy costs. Christine Lagarde has cautioned that the conflict is adding to inflationary pressures, while policymakers in multiple regions are preparing for possible interest rate responses.
In the US, rising fuel prices are beginning to weigh on consumers. Jerome Powell has said it is too early to fully assess how higher oil prices will influence inflation and monetary policy decisions.
The outlook for oil markets, Bloomberg noted, remains closely tied to geopolitical developments. While diplomatic efforts are ongoing, tensions remain elevated, with the risk of further military escalation.
US President Donald Trump has set a short timeline for Iran to engage in talks, while maintaining that oil prices would ease once the conflict subsides. At the same time, officials are preparing for a potentially prolonged military campaign, suggesting continued volatility in global energy markets.