Middle East conflict could push oil prices to $110, analyst warns
According to Rigzone, EY-Parthenon Chief Economist Gregory Daco outlined two potential scenarios for the ongoing Middle East conflict following recent US-Israeli military strikes on Iran, with oil prices rising significantly in both cases.
In a “moderate escalation” scenario, Daco projects Brent crude would temporarily rise by roughly $20 per barrel into the $80 range, while European natural gas prices would surge 50% to around $58 per MWh. A “severe escalation” involving sustained interruption of the Strait of Hormuz could push oil prices up more than $40 per barrel toward $110, with natural gas prices rising 150% and remaining 100% above baseline through year-end.
What It Means for Subcontractors
- Fuel costs could jump 25-50% in the moderate scenario or double in severe escalation, significantly impacting equipment operating costs and transportation expenses
- Higher energy prices typically boost drilling activity and field services demand, potentially offsetting increased operating costs with more work opportunities
- Companies should prepare for volatile fuel pricing and consider fuel surcharge clauses in new contracts to protect margins during price spikes
