Oil prices are likely to remain elevated for years as the global market absorbs the long shadow of the war involving Iran, according to a report from Australia and New Zealand Banking Group (ANZ) released on April 14.
Supply shock pushes Brent forecast above $90
ANZ strategists Daniel Hynes and Soni Kumari estimate that around 10 million barrels of oil per day have been removed from global supply compared with their January baseline.
They say this loss alone is keeping crude prices at historically high levels, even without any further escalation. The bank now expects Brent crude to trade above 90 U.S. dollars per barrel for the rest of the year.
The report argues that the market is undergoing a structural shift, with prolonged geopolitical conflict becoming a central driver of pricing rather than a temporary shock.
Slow and uneven supply recovery
According to ANZ, supply recovery is likely to be slow, partial, and uneven until at least mid-2026.
Easing the current tightness, they note, would require either:
- a sharp drop in global demand, or
- a rapid and coordinated supply response,
neither of which appears likely in the near term.
The ongoing 10 million barrel per day reduction is reshaping:
- trade flows,
- pricing benchmarks, and
- inventory distribution patterns worldwide.
Limits of strategic reserves and market flexibility
Strategic petroleum reserve releases, a traditional tool for smoothing short-term volatility, have delivered only limited and temporary relief, the report says.
The shortfall in physical supply has now extended beyond what reserves can realistically offset, highlighting a marked decline in the market’s flexibility to absorb shocks.
Behavior in the market is amplifying scarcity
Market behavior is magnifying the physical shortage, according to Hynes and Kumari.
They point to:
- government stockpiling, and
- speculative positioning by financial players
as factors that have intensified scarcity effects, pushing prices higher than the physical deficit alone would justify.
The report concludes that a “war premium” is now embedded in oil prices and could persist as the market searches for a new equilibrium.
Energy shock is feeding into inflation and policy
Higher oil prices are feeding directly into inflation expectations and monetary policy.
The U.S. Bureau of Labor Statistics recently reported a 3.8% year-over-year increase in the Consumer Price Index, a level that has been slow to decline and remains well above the Federal Reserve’s 2% target.
In an April 11 speech, Federal Reserve Governor Adriana Kugler cautioned that “the path to our 2% target remains uncertain,” signaling that prospects for near-term policy easing are limited.
Tight financial conditions pressure risk assets
This backdrop of elevated energy costs and persistent inflation is reinforcing tight monetary conditions.
Risk-sensitive assets have already come under pressure. The Nasdaq 100 index has fallen 4.2% over the past thirty days, reflecting growing concern over higher-for-longer interest rates.
At the same time, capital is shifting toward safer, income-generating instruments. The benchmark 10-year U.S. Treasury note is yielding about 4.95%, a level that is attracting funds away from more speculative positions that lack a comparable yield.
Implications for market participants
Hynes and Kumari argue that high oil prices should not be viewed as an isolated commodity story but as a core driver of a more restrictive financial climate.
With supply recovery not expected before 2026 and central banks constrained by stubborn inflation, market participants whose strategies rely on abundant liquidity and strong risk appetite may face challenging conditions for many months.
Worried about inflation and market shocks? Learn how crypto and inflation interact and how traders protect their portfolios.
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