BofA Sees Oil Near $120 for Months if Iran Resumes Infrastructure Strikes, After Brent's Highest Close Since April

Since Brent closed at a six-month high on Friday, Oct. 23, the question for oil markets has shifted from where prices are to how much higher they go if the Iran conflict widens. Bank of America has now put a number on it.

Francisco Blanch, the bank's head of commodities and derivatives research, told Bloomberg Television today, Oct. 26: "If Iran goes back to attacking infrastructure in the region, we think $120 a barrel is probably on the cards on average for the next few months." He was responding to Trump's comments that he is weighing further attacks or a resumption of peace talks with Tehran.

$120 is an average, not a spike. It sits only about 3% above Friday's settlement.

Where prices stand

Brent futures rose 3.1%, or $3.55, to settle at $116.72 on Friday. That is the highest close since April 29. West Texas Intermediate gained 3.8% to settle at $103.27.

Brent gained 6.2% on the week and WTI 2%. It was the third straight weekly advance for both benchmarks, according to The Business Standard's tally.

Fox News reported that Brent briefly topped $117 a barrel on Friday as uncertainty surrounding the Iran conflict continued to weigh on global energy markets.

Saudi Arabia under fire

The Houthi campaign against Saudi energy sites is a large part of what is moving the market. Saudi state media said a drone strike on the eastern Shaybah oilfield on Oct. 21 killed two people and injured two. A separate attack on King Fahd International Airport in Dammam killed at least two and injured eight.

Saudi Aramco told employees at its Dhahran headquarters to move to secure locations and work remotely. The U.S. State Department ordered non-essential government personnel out of Saudi Arabia.

The Houthis are an Iran-backed group. Blanch's scenario is specifically about Iran itself returning to infrastructure attacks, which would be a step beyond the current Houthi strikes.

Trump's open question

Trump said on Oct. 21 that Washington was not negotiating with Tehran and that "something will happen soon." Senior U.S. officials have said the U.S. and Israel are weighing joint strikes on Iranian assets after the midterms. No new military operation has been announced.

The administration continues to enforce a naval blockade on Iranian oil exports. Commercial vessels still face security threats in the Strait of Hormuz.

Iran's military chief, cited by Iranian media, said its forces are fully prepared for asymmetrical warfare after recent upgrades to its defenses.

The diplomatic track

There is a counter-scenario, and the people holding it are in Vienna and Moscow, not on trading desks. International Atomic Energy Agency chief Rafael Grossi told the U.N. General Assembly in New York on Friday that the agency has completed much of the preparation needed to verify Iran's nuclear activities. He said the IAEA is ready to monitor independently if Washington and Tehran reach a deal.

Grossi said a lasting resolution would require international oversight. He also voiced optimism about mediation efforts by Pakistan, Qatar, Oman and Egypt.

No agreement authorizing inspections has been announced. Russian President Vladimir Putin is due to host Iranian President Masoud Pezeshkian in Moscow next week.

What the strike talk has already done

Markets have responded to strike talk before. Brent jumped past $105 a barrel in a single session after a report that the White House had asked the Pentagon for options to resume attacks before the Nov. 3 vote. Two administration officials told The Atlantic about the request. Other outlets reported at the time that nothing had been decided.

Brent has risen further since then and settled at $116.72 on Friday. Gasoline was averaging $4.36 a gallon nationally on Oct. 9, more than 45% above its level when the war began on Feb. 28, the LA Globe reported.

The next test comes from the calendar. Trump has tied any decision on new strikes to the period after Nov. 3, and Putin's meeting with Pezeshkian is scheduled for next week. Whether Brent gets to Blanch's $120 average depends on which track Washington picks once the votes are counted.