Oil prices may surge to $130-140 if West Asia War drags on

New Delhi

The escalating conflict in West Asia is sending shockwaves through global markets, with oil prices at the forefront of the turmoil. Anindya Banerjee, head of research for commodities and currencies at Kotak Securities, warns that the Brent crude oil price, currently hovering around $109, could breach the $130-140 mark if the war prolongs.

"The longer this continues, the more the impact on oil prices. Every passing week is crucial," Banerjee told ANI in an interview. The disruption in oil supplies from the region, impacting around 8% to 10% of global oil and 15% to 20% of gas, is the primary driver behind the price surge. With inventories depleting rapidly and spot prices trading at a $20-30 premium over futures, Banerjee emphasises that every passing week in April will only push prices higher.

"If this continues, it will lead to demand disruption eventually," he added, highlighting the risk of collateral damage to the global economy. The Indian economy, while resilient, is bracing for the impact. Banerjee noted that inflation is a certainty, with headline CPI potentially crossing 5% in the short term. "If this continues for another six months, we could see core inflation rise, leading to some demand destruction," he said.