Oil could plunge to $40 after Iran conflict ends, U.S. Treasury chief says

U.S. Treasury Secretary Scott Bessent said oil prices could fall sharply to about $40 a barrel once the Iran conflict ends, arguing that a surge in production would leave the crude market heavily oversupplied.

Brent crude futures stood at $96.30 a barrel on Sept. 5, close to their highest level since July. West Texas Intermediate rose to $91.48 after a new round of military confrontation between the United States and Iran earlier in the week.

In an interview broadcast on Sept. 4, Bessent said oil could fall to $50 or even $40 after the conflict. He did not give a timetable for its end, while Bloomberg reported that signs suggested the war would not conclude quickly. A Republican member of the House Armed Services Committee described the current military situation as “stagnant.”

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We will get through the difficulties of the Iran conflict, and I expect oil prices to fall. After the conflict, the crude market will be heavily oversupplied. Because of the large increase in production, we will see oil prices at $50 or $40.

Bessent also said the recent rise in energy prices had intensified inflation concerns and pushed up benchmark bond yields. The yield on the U.S. 10-year Treasury bond reached its highest level since 2023 during the week.

“If you look carefully at the interest-rate moves, you will see that their correlation with oil prices has reached an unprecedented level of tightness,” Bessent said. He predicted that the end of the Iran conflict would bring down interest rates and broader inflation.

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If you look carefully at the interest-rate moves, you will see that their correlation with oil prices has reached an unprecedented level of tightness. The Iran conflict will end, and interest rates as well as elevated overall inflation will fall.