Bessent Predicts $40 Oil Once Iran Conflict Is Over

ERBIL (Kurdistan24) - U.S. Treasury Secretary Scott Bessent says crude oil could fall as low as $40 a barrel once the conflict with Iran ends, arguing that a surge in global supply would reverse the energy-price shock that has pushed U.S. diesel to a record high and contributed to rising inflation and bond yields.

"We're going to get on the other side of this Iran conflict, and I expect that oil will come down," Bessent said in an interview with Steve Bannon aired Friday, according to Bloomberg reporter Yash Roy.

Bessent said the oil market could become significantly oversupplied after the conflict, potentially driving crude to $50 or even $40 a barrel as additional production comes online.

He offered no timetable for when the six-month confrontation might end.

His forecast contrasts sharply with current market conditions. Bloomberg reported that Brent crude traded above $95 a barrel Friday, near its highest level since July, while U.S. benchmark West Texas Intermediate was around $91 following renewed military exchanges between Washington and Tehran this week.

Higher oil prices have added to inflation concerns and pushed government borrowing costs higher. The yield on 10-year U.S. Treasury securities reached its highest level since 2023 this week, Bloomberg reported.

Bessent argued that the relationship between oil prices and interest rates has become unusually strong and predicted that both inflation and bond yields would fall once the conflict ends and energy costs retreat.

"The Iran conflict will end, interest rates and the spike in headline inflation will come down," he said.

Record Diesel Prices Show Immediate Economic Cost

For American consumers and businesses, however, the immediate direction of energy prices remains upward.

Agence France-Presse reporter Beiyi Seow reported Friday that the average U.S. diesel price had reached a record $5.85 per gallon, compared with $3.71 a year earlier, according to the AAA motorists' association.

Diesel is particularly important because it powers much of the country's trucking, agricultural and construction activity, meaning increases can spread through food, transportation and other consumer prices.

North Carolina farmer Derrick Austin told AFP that higher diesel costs could add roughly $15,000 to the expense of harvesting his soybean and corn crops this fall.

Gasoline has also become considerably more expensive. AFP reported an average price of $4.15 per gallon for regular gasoline, up from $3.20 a year earlier.

Afdhal Rahman of banking group OCBC noted that refined fuels such as gasoline and diesel have increased more sharply than crude itself, intensifying the impact on consumers.

The disruption began after U.S.-Israeli strikes against Iran in late February triggered Iranian retaliation and severe restrictions on shipping through the Strait of Hormuz, one of the world's most important energy corridors.

Oil prices surged again this week as fighting resumed.

Vice President JD Vance, asked about earlier expectations from Bessent that Americans could potentially see gasoline near $3 a gallon by Labor Day on Sept. 7, blamed the failure of prices to fall on the unpredictable course of the Iran conflict.

The economic consequences are increasingly politically sensitive with U.S. midterm elections scheduled for November.

Bessent Maintains Hard Line on Tehran

Bessent's expectation of sharply lower postwar oil prices comes alongside an increasingly aggressive Treasury campaign aimed at restricting Iran's access to international financial networks and oil revenue.

Kurdistan24 reported Friday that the Treasury Department sanctioned Türkiye-based Golden Global Bank and related companies, accusing them of facilitating tens of millions of dollars in transactions for Iran's Islamic Revolutionary Guard Corps Quds Force.

Bessent said Washington would continue targeting institutions assisting Tehran under what the administration calls Operation Economic Outcast.

He also claimed that no Iranian crude shipments had successfully passed through the Strait of Hormuz to China since the United States reinstated its blockade, describing Iranian oil as increasingly stranded aboard vessels with limited storage capacity.

Those assertions are part of the administration's broader argument that military and financial pressure can steadily erode Tehran's ability to finance its war effort.

For markets, however, much depends on how and when the conflict ends.

Bloomberg noted that there is little evidence of an imminent conclusion. One Republican member of the House Armed Services Committee described the military situation this week as "stalled."

That uncertainty makes Bessent's $40 forecast heavily dependent on conditions that have yet to materialize: an end to hostilities, normalized energy transit, expanded production and sufficient additional supply to create the oversupply he expects.

Bessent also dismissed concerns over a proposal by Norway's sovereign wealth fund to reduce its exposure to U.S. government bonds, a move Bloomberg analysis suggested could lower its Treasury holdings by about $75 billion.

He argued that Norway may instead shift toward other U.S. government-linked securities carrying higher yields, including debt associated with housing-finance institutions Fannie Mae, Freddie Mac and Ginnie Mae.

For now, the more immediate economic picture remains dominated by expensive oil, record diesel costs and elevated borrowing rates.

Bessent's forecast amounts to a very different postwar scenario: abundant oil, sharply cheaper crude, cooling inflation and declining interest rates.

Whether that scenario arrives depends first on the question his comments did not answer, when the Iran conflict will actually end.