‘Profound implications’: Oil at $40 or $150? BlackRock’s Larry Fink explains two scenarios amid US-Iran war

The ongoing Iran war, now nearing four weeks with no clear resolution, is already pushing oil prices above $100 per barrel, with visible impact on fuel and household costs. Against this backdrop, Larry Fink, chairman and CEO of BlackRock, has outlined two sharply divergent paths for oil markets and the global economy.

Speaking to the BBC, Fink said the conflict could either ease, leading to a sharp fall in oil prices, or persist, keeping crude elevated for years. “I could paint a scenario where I could see, a year from now, oil at $40 a barrel… I could see it above $150. We have two very extreme outcomes,” he said.

The impact is already being felt in the US, where the national average price of gasoline has climbed to nearly $4 per gallon, up more than $1 in March alone and 27% higher year-on-year, according to AAA.

Best-case scenario: Oil collapse if conflict eases

In the more optimistic scenario, the war would end, Iran would reintegrate into global markets, and the Strait of Hormuz — a critical oil transit route — would reopen. This could release significant oil supply into global markets.

Using estimates from the US Energy Information Administration, where every $1 change in oil prices translates to about 2.4 cents per gallon in fuel prices, a fall to $40 per barrel could push gasoline prices down to around $2.40 per gallon — levels last seen during the post-pandemic phase.

The closure of the Strait of Hormuz, which carries about 20% of global oil supply, has already caused what the International Energy Agency describes as the largest supply disruption in oil market history. Reopening it remains central to easing global price pressures.

Fink suggested that if Iran becomes part of the global economic system again, combined with increased supply from countries like Venezuela, oil prices could fall even below pre-war levels.

In contrast, if the conflict continues and geopolitical tensions remain elevated, oil prices could stay above $100 and even move toward $150 per barrel.

Fink warned that such a scenario would have wide-ranging consequences. “I would argue that we could have years… above $100, closer to $150 oil which has profound implications in the economy,” he said.

At those levels, US gasoline prices could exceed $5 per gallon, significantly raising transportation and logistics costs. Higher diesel and energy prices would also feed into food inflation, given their role in supply chains and fertiliser production.

He added that the divergence between the two scenarios is stark: “The $40 oil implication is one of abundance and growth and the other one is an outcome of probably a stark and steep recession”.

The uncertainty around oil prices is also influencing financial markets. Rising yields and inflation expectations have already shifted expectations around interest rate cuts.

In his annual letter to investors, Fink noted that market volatility often coincides with strong long-term returns. “Over time, staying invested has mattered far more than getting the timing right… Miss just the ten best days, and you would have earned less than half,” he wrote.

As the conflict continues, the trajectory of oil prices– and by extension inflation, growth and financial markets – will hinge on whether geopolitical tensions ease or deepen further.