RBC Capital is revising its assessment of the standoff between Iran and the United States, saying conversations in Washington have prompted the bank to push out the expected duration of the conflict and to increase its appraisal of market implications.
Helima Croft, RBC's head of global commodity strategy, wrote that the bank has taken a more prolonged scenario into consideration following input from U.S. policymakers and experts. "A number of experts have suggested that a combination of expanded U.S. war aims as well as Iranian asymmetric capabilities could prolong the conflict well into the spring," Croft said.
Based on that assessment, RBC now views it as likely that oil prices could climb above the highs seen during the Russia-Ukraine crisis in 2022 if hostilities continue for several more weeks. Croft added, "we believe that we will exceed the Russia/Ukraine oil price highs of $128/bbl in 2022 if the war continues for another three to four weeks."
The bank also set out a scenario for a longer conflict. If fighting stretches for several more months, Croft wrote that prices could move beyond the 2008 record of $146 a barrel. That projection rests on the assumption that sustained attacks and operational disruptions would increasingly tighten physical crude and refined product markets.
RBC said Washington originally expected a short engagement but is now contemplating more complex responses. Among the options being weighed is the potential deployment of ground troops to secure enriched uranium at the Isfahan reactor, the bank said, indicating an expansion of possible U.S. objectives.
Croft highlighted Iran's ability to continue offensive actions even if the United States seeks an early exit. She noted that Iran maintains "ample short-range missile, drone and naval mine capabilities," and added that "the Shahed drones are vastly cheaper than interceptors being deployed against them," which can allow Tehran to sustain pressure on targets despite defensive measures.
RBC summarized the emerging strategic picture as a potential "war of attrition," and said this scenario materially raises upside risks to crude prices. The bank's updated view frames an extended period of elevated volatility and supply-side risk for oil markets should the conflict not be swiftly resolved.
Summary
RBC Capital has revised its outlook to account for a longer Iran-U.S. conflict, warning that sustained hostilities could push oil above the 2022 high of $128 per barrel within weeks and toward the 2008 peak of $146 per barrel if fighting lasts for months. The bank cites expanded U.S. objectives and Iran's asymmetric capabilities as key factors increasing upside risks for crude.
Key points
- RBC now anticipates the conflict could continue "well into the spring," based on expert discussions in Washington.
- The bank believes oil could exceed $128/bbl within three to four weeks if the war continues; a multi-month conflict could drive prices toward $146/bbl.
- Sectors affected include global oil markets, energy-dependent industries, and financial markets exposed to commodity volatility.
Risks and uncertainties
- Duration uncertainty - The length of the conflict remains uncertain, and a prolonged engagement would increase supply-side pressure on crude prices, affecting oil and gas markets.
- Operational and tactical factors - Iran's short-range missiles, drones and naval mines, and the relative cost-efficiency of Shahed drones versus interceptors, could sustain attacks and complicate defensive responses, increasing disruption risk for shipping and energy infrastructure.
- Policy escalation - U.S. considerations about expanding objectives, including ground operations at facilities such as the Isfahan reactor, create uncertainty around the scope and intensity of the conflict and its market consequences.
Note: This piece reports RBC Capital's updated assessment and statements attributed to Helima Croft as provided to the bank's clients and public commentary. The article does not include any new or independent forecasts beyond those presented by RBC.