Crude oil could crash to $40 after Iran war ends, says US Treasury Secretary Scott Bessent

US Treasury Secretary Scott Bessent expects oil prices to fall sharply once the conflict with Iran ends, potentially dropping to $40 a barrel as global supply expands. He also believes such a decline could ease inflation pressures and pull US bond yields lower after their recent rise.

In an interview with Steve Bannon that aired on Bloomberg TV on Friday, Bessent said the oil market could face significant oversupply after the Iran conflict is resolved.

“We’re going to get on the other side of this Iran conflict, and I expect that oil will come down.”

He added that increased production coming online could push crude prices to $50 or even $40 a barrel, although he did not provide a timeframe for when the conflict might end.

The comments come as the military confrontation between the US and Iran continues to weigh on energy markets. Brent crude was trading above $95 a barrel on Friday, close to its highest level since July, while West Texas Intermediate was around $91. Oil prices have climbed in recent weeks following military strikes involving the US and Iran.

The increase has intensified concerns about inflation, particularly because higher energy costs can feed into consumer prices. Rising inflation expectations have, in turn, contributed to higher government bond yields. The US 10-year Treasury yield reached its highest level since 2023 this week.

Bessent argued that the relationship between oil prices, inflation and interest rates has become particularly pronounced.

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

However, the timing of any decline in oil prices remains uncertain. The conflict shows few immediate signs of ending, while a Republican member of the House Armed Services Committee described the military situation this week as “stalled.”

Crude oil prices surge over 9% this week

Crude oil prices recorded their strongest weekly gain since mid-July as the escalating US-Iran conflict heightened concerns over supply disruptions and the security of key shipping routes. Crude oil traded around $91.20 a barrel on Friday and was up more than 9% for the week, according to Trading Economics. Iran and the US exchanged missile strikes during the week, while Israel’s defence minister threatened “crippling” attacks on Iranian infrastructure, including energy facilities.

US Vice President JD Vance said Washington would not pursue peace talks until Iran stops attacking ships in the Strait of Hormuz, adding to upward pressure on prices. The EU has also joined the US-led sanctions campaign against Iran, while South Korea is considering a military role. However, the rally could weaken if oil shipments through the Strait of Hormuz increase.