US Treasury's Bessent Forecasts Crude Oil Could Fall to $40 Post-Iran Conflict as Oversupply Risk Emerges

The Quick Take

• Treasury Secretary Scott Bessent predicts crude oil prices could fall to $40 per barrel after the Iran conflict ends, representing a 50%+ decline from current Hormuz-crisis levels.
• Bessent also expects lower bond yields post-conflict as geopolitical risk premium unwinds from US Treasuries, benefiting duration-sensitive assets.
• India, as a major crude importer, would be a significant beneficiary of a post-conflict oil price decline through lower import bills and reduced inflation pressure.

US Treasury Secretary Scott Bessent has made a notable forecast: crude oil prices could fall to $40 per barrel following resolution of the Iran conflict that has sustained the current Hormuz crisis premium in energy markets. The $40 price target represents a significant reversal from current levels — Brent crude has been trading at elevated levels throughout the Hormuz crisis as markets price supply disruption risk from the world's most critical oil transit chokepoint. Bessent's logic rests on two mechanisms: the unwinding of the geopolitical risk premium once the conflict concludes, and the potential for an oversupply situation as OPEC production that had been informally constrained during the crisis period returns to market simultaneously with previously disrupted Iranian exports.

The oil market implications of a $40 post-conflict scenario would be transformative across multiple sectors. For energy equities — US upstream producers, Equinor, Saudi Aramco — whose earnings have been dramatically enhanced by Hormuz-elevated prices, a return to $40 would erase the margin expansion of the past two years. Refining margins would also compress as the feedstock cost advantage at elevated crack spreads normalizes. Conversely, sectors that pay high energy bills — airlines, shipping companies, chemical manufacturers, fertilizer producers — would see significant cost relief. For sovereign wealth funds of Gulf oil exporters, lower oil prices reduce the fiscal revenues that fund their domestic spending programs and sovereign investment mandates.

The critical forward signal for the post-conflict oil price trajectory is the pace of Hormuz shipping normalization and any OPEC+ production response. If OPEC+ immediately increases output to recapture market share post-conflict, prices could fall faster and further than Bessent's $40 estimate. If OPEC+ acts with discipline to manage the price decline, the fall would be more gradual. For India, the Bessent forecast is highly significant: every $10/bbl decline in crude oil reduces India's annual import bill by approximately $20-25 billion, directly benefiting the current account balance and enabling the RBI to reduce inflation pressure without aggressive rate hikes. Watch the Indian government's fuel subsidy policy response to any post-conflict price decline as a signal of whether the savings flow through to consumers or are retained as fiscal consolidation.

Synthesized from 2 sources.