Trump administration officials are studying what a potential jump in oil prices to $200 a barrel could mean for the economy, indicating that senior officials are examining the possible consequences of extreme scenarios of war with Iran, citing sources familiar with the situation, Bloomberg reports, writes UNN.
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Modeling how devastating a larger jump in oil prices could be for growth prospects is part of a regular assessment conducted during periods of tension and is not a forecast, sources said. These efforts are aimed at ensuring the administration is prepared for all contingencies, including a protracted conflict, they said.
Even before the war began, US Treasury Secretary Scott Bessent expressed concern that the conflict would lead to rising oil prices and damage economic growth, sources said. According to some sources, senior Treasury officials have been expressing concerns about fluctuations in oil and fuel prices at the White House for several weeks.
White House press secretary Kush Desai called the claim "false," stating: "While the administration constantly assesses various pricing scenarios and economic consequences, officials are not considering the possibility of oil prices reaching $200 a barrel, and Secretary Bessent was not 'concerned' about short-term disruptions as a result of Operation Epic Fury."
Bessent, he said, has repeatedly "expressed both his and the administration's unwavering confidence in the long-term trajectory of the American economy and global energy markets."
Oil prices jumped after the US and Israeli attack on Iran on February 28: the price of West Texas Intermediate crude rose by approximately 30% to $91 a barrel. The price of Brent crude rose by almost 40% during the same period and is trading at around $102.
On Wednesday, the White House said that diplomatic efforts to end the war were still ongoing, despite Iran's public rejection of US President Donald Trump's calls for negotiations and threats of further military action if no agreement was reached. On Monday, Trump set a five-day deadline for Iran to negotiate an end to the war.
Trump tells aides he wants quickest end to Iran war - WSJ learns timeline26.03.26, 10:24
The administration had planned for the military campaign to last 4-6 weeks, as reported by the White House. US Energy Secretary Chris Wright said on March 12 that a jump to $200 a barrel was "unlikely."
A price of $200 a barrel would be a huge shock to the global economy. Adjusted for inflation, the price has reached this level only once in the last half-century – in 2008, shortly before the global financial crisis, the publication notes.
Even at lower prices, Bloomberg Economics predicts that a jump in oil prices to $170 a barrel for several months would lead to rising inflation in the US and Europe and slower economic growth.
Trump said he was not concerned about rising energy prices, even suggesting it was beneficial for the US, and predicted a sharp drop in oil prices after the war ended.
However, the almost complete cessation of supplies through the Strait of Hormuz, through which up to a fifth of the world's oil and gas exports normally pass, has already hit economies worldwide.
European Central Bank President Christine Lagarde said last week that military actions have increased inflationary risks. Her colleagues in Frankfurt, London, and Japan are preparing to raise interest rates as early as next month.
In the US, the most noticeable consequence has been a 30% increase in retail gasoline prices, which has negated the price reductions over the past year that Trump cited as a key economic achievement.
The prospects for monetary policy are even becoming increasingly uncertain, as the US Federal Reserve monitors the impact of rising oil prices on inflation. Last week, Fed Chairman Jerome Powell said it was too early to assess the impact of sharply rising oil prices on the US economy.