Oil prices could soar as a high as $157 a barrel should conflict in the Middle East continue to escalate, according to the World Bank.
There are concerns that arising conflict will inflict a "dual shock" to markets following on from Russia's invasion of Ukraine last year.
The worst-case scenario predicted by the bank would be comparable with the Arab oil boycott of the west in 1973.
But even a "small disruption" could cause prices to rise to more than $100 a barrel, from the below $90 a barrel as they are today.
Varying 'disruption scenarios' if conflict escalates
The World Bank has produced three risk scenarios that could happen if disruption in the Middle East develops further, based on historical experiences.
- "Small disruption scenario". Global oil supply would be reduced by 0.5million barrels to 2million barrels a day, similar to that seen during the 2011 Libyan civil war. Prices would rise by 3% to 13% to between $92 and $103 a barrel.
- "Medium disruption scenario". Global oil supply would be reduced by 3million barrels to 5million barrels a day, similar to that seen during the 2003 Iraq war. Prices would rise by 21% to 35% to between $109 and $121 a barrel.
- "Large disruption scenario". Global oil supply would be reduced by 6million barrels to 8million barrels a day, similar to that seen during the 1973 Arab oil embargo. Prices would rise by 56% to 75% to between $140 and $157 a barrel.
Indermit Gill, the World Bank’s Chief Economist, said: "The latest conflict in the Middle East comes on the heels of the biggest shock to commodity markets since the 1970s—Russia’s war with Ukraine.
"That had disruptive effects on the global economy that persist to this day. Policymakers will need to be vigilant. If the conflict were to escalate, the global economy would face a dual energy shock for the first time in decades - not just from the war in Ukraine but also from the Middle East."
Adding to that, Ayhan Kose, the World Bank’s Deputy Chief Economist, said: "Higher oil prices, if sustained, inevitably mean higher food prices."
"If a severe oil-price shock materializes, it would push up food price inflation that has already been elevated in many developing countries. At the end of 2022, more than 700 million people - nearly a tenth of the global population - were undernourished.
"An escalation of the latest conflict would intensify food insecurity, not only within the region but also across the world."