- Iran's weekend bombardment of Israel could push Brent crude to $100 a barrel, Ed Yardeni wrote in a note.
- It's reminiscent of the 1970s energy crises that sparked a 'decades-long' inflationary spiral, he said.
- But the market's reaction has so far been muted, and JPMorgan expects Brent to peak at $90 through May.
Worsening Middle Eastern conflict could fuel a ramp-up in oil prices, catapulting Brent crude to $100 per barrel, Ed Yardeni said.
It's a call the Yardeni Research head has suggested before, but reinforced in a Monday note, following Iran's missile attack on Israel over the weekend. The bombardment came as retaliation for a Israeli embassy attack that killed top Iranian military officials.
"This latest escalation of the regional war is likely to cause the price of a barrel of oil to jump closer to $100, the way it did when Russia invaded Ukraine in early 2022," he said. "That would be very reminiscent of the 1970s when two energy crises fueled a decades-long wage-price-rent spiral."
At that time, a Middle Eastern oil embargo on the US — sparked by Washington's support for Israel during the 1973 Arab-Israeli War — sent gas prices surging and propelled the consumer price index into double-digit territory.
If current hostilities were to send Brent crude, the international benchmark, to $100 per barrel, that would represent 12% upside from $89 where the benchmark was trading as of 10 a.m. ET on Monday.
But so far, Brent prices have only slid since the weekend clash, as investors bet on a de-escalation of tensions. Factoring into this is Iran's announcement that it sees the matter as concluded, and the US' refusal to join any Israeli retaliation.
In fact, JPMorgan expects Brent crude to go no further than $90 a barrel through May, averaging an $85 price through the second quarter, it said in its own note.
It pushed back against comparisons to 1973, noting that Middle-Eastern states today will be disincentivized from pursuing hostilities, given a commitment to long-term economic development plans.
"Moreover, while Western countries were the main importers of crude produced by Arab countries at that time, today two-thirds of GCC's oil exports are purchased by Asia," analysts wrote; this would dampen the effect of any major embargo.