Oil Could Tumble to $40-$50 Post-Iran Conflict, Easing Inflation, Says Treasury Secretary Besant

U.S. Treasury Secretary Besant stated that international oil prices could fall sharply to between $40 and $50 per barrel following the conclusion of the ongoing conflict with Iran. In a Friday interview, he suggested that such a decline would also help lower global bond yields, which have been pushed higher by rising energy costs and inflation concerns.

Post-Conflict Price Forecast

Besant argued that the global oil market could shift to a significant supply surplus once the conflict ends. "We will eventually get through this Iran conflict, and I would expect oil prices to come down then," he said, adding that new supply coming to market could push crude down to "$50, maybe $40."

This forecast represents a potential drop of nearly 50% from current levels. On Friday, Brent crude traded above $95 per barrel, near highs not seen since July, while West Texas Intermediate (WTI) held around $91 per barrel. Besant did not offer a specific timeline for the end of the conflict, which a Republican member of the U.S. House Armed Services Committee recently described as a "stalemate."

Implications for Inflation and Bonds

The Treasury Secretary highlighted the tight link between energy prices and interest rates, noting the correlation is currently at a "very high level." Rising oil prices have been a key pressure point for the global bond market, fueling fears of resurgent inflation and pushing investors to demand higher yields. This week, the 10-year U.S. Treasury yield rose to its highest level since 2023.

Ad

Besant suggested that once the conflict-driven energy shock subsides, both inflation and interest rates should recede. "The Iran conflict will end, and when it does, this short-term spike in rates and overall inflation will come down," he said. This implies the recent surge in borrowing costs is not necessarily a sign of a structural worsening in the long-term inflation outlook.

Broader Market Context

Besant also downplayed concerns about Norway's sovereign wealth fund potentially reducing its holdings of U.S. government debt. The fund is reportedly considering a move that could cut its U.S. Treasury position by approximately $75 billion.

He suggested the fund is more likely reallocating capital within U.S. assets to achieve higher returns rather than exiting the market. Besant said he would "very much support" a shift into agency bonds issued by government-sponsored enterprises like Fannie Mae and Freddie Mac, which typically offer higher yields than Treasuries. This commentary comes as a measure of the U.S. national debt has surpassed a record $40 trillion, heightening the need to attract consistent demand for government bonds.