The British government raised its oil price forecast: even if the US and Iran reconcile, oil prices may remain at $100 before 2028.

The UK government has raised its internal oil price forecast, assessing that even if the US and Iran reach a peace agreement, crude oil prices may still remain around $100 a barrel before 2028, as the recovery of energy supplies in the Gulf region is expected to take longer. The report has not been made public yet, but sources who have seen it in advance say that this latest analysis warns that the pressure on energy prices will be more prolonged than previously imagined, and the global economic outlook will deteriorate. Although the UK government initially envisioned about six months of disruption in the energy market after the war ended, meaning a relatively quick recovery in the supply flow in the Persian Gulf, it now believes that the region's oil supply will take up to 14 months to recover. If this forecast becomes a reality, it will be another blow for the Prime Minister Keir Starmer's government, which is trying to show the British voters its efforts to curb the rising cost of living. Not to mention the broader damage it will cause to the global economy, as countries around the world are currently struggling to cope with higher energy and food prices as well as fuel shortages. Domestically in the UK, the study indicates that whoever becomes the Prime Minister later this year will have to deal with a potentially prolonged economic downturn. The Starmer government is widely seen as close to collapse, with Greater Manchester Mayor Andy Burnham expected to launch a leadership challenge this summer provided he wins the parliamentary by-election on June 18. A spokesperson for the UK government said in a statement that the country has a diverse and resilient energy supply. The statement said that the UK is working with international partners to seek a permanent solution to the US-Iran crisis and minimize the impact on households. Analysis shows that even in the best-case scenario of the US and Iran reaching an agreement this year, due to slow recovery in the Gulf region supply flow, oil prices may still range between $100 and $150 per barrel by the end of the year. The report predicts that in this scenario, oil prices will still be around $100 per barrel by 2028. According to the assessment, in the worst-case scenario of war breaking out again and the energy infrastructure in the region being newly destroyed, leading to further delays in the recovery of energy flow, oil prices could initially soar to as high as $210 and stay around $150 by 2028. The report states that if this scenario becomes reality, it will have broad implications for global inflation and economic growth in the coming years, as well as lasting consequences for geopolitics and security. Bloomberg's UK recession probability index has risen to nearly 40% in the past month. According to sources, these pessimistic forecasts were made by the UK Department for Energy Security and Net Zero as part of a new round of government-wide assessments of the economic impact of the US-Iran war. Sources granted anonymity to discuss confidential government analysis said that these forecasts have been presented to senior ministers. Even the more moderate price trends proposed in the study would exceed the expectations of most analysts. According to aggregated forecasts, Brent crude was trading at around $95 per barrel on Friday, with no significant rise expected by the end of the year. Governments around the world, including the UK, have previously committed to releasing an unprecedented 400 million barrels of oil reserves to address this supply crisis. However, as it takes time for shipping flows through the Strait of Hormuz to return to normal, some analysts estimate that there could currently be a supply loss of up to 2 billion barrels. A previous analysis by the UK government suggested that if the war ends quickly, oil prices will stabilize below $100; if the conflict persists, oil prices will rise to $150. The futures market currently expects oil prices to fall below $90 before 11 and continue to decline. The worst-case scenario simulated by the Bank of England is that oil prices will remain above $100 for at least the next two years, and inflation will rise to over 6% early next year. Earlier this week, Bank of England Monetary Policy Committee member Megan Greene said that the case for raising interest rates is strengthening as the US-Iran war continues. With rising energy bills for households and businesses, UK inflation is expected to rise to nearly 4% later this year.