Are we heading for an all-out war in the Middle East?
That’s the question Rigzone asked Benjamin Zycher, a Senior Fellow at the American Enterprise Institute (AEI), and Doug Bandow, a Senior Fellow at the Cato Institute.
Responding to Rigzone – and defining an all-out war as a war among Iran, Saudi Arabia, Israel and others – Zycher believes the answer to that question is “no”.
When asked what an all-out war would mean for oil prices, Zycher responded by telling Rigzone “not a huge increase”, adding that, “even with the Strait of Hormuz closed, we might see another $10 per barrel or thereabouts”.
When Rigzone asked what an all-out war would mean for U.S. gasoline prices, Zycher noted that it was “hard to say”, but added, “probably something on the order of another 30 cents a gallon”.
Bandow told Rigzone that the war is expanding and said Iran has an incentive to broaden it further.
“The wider the attacks, the greater the likely impact on oil and gasoline prices,” he stated.
“Protecting oil traffic in response would entangle the U.S. even further,” Bandow warned.
In a report sent to Rigzone on Tuesday, Standard Chartered Bank Energy Research Head Emily Ashford said energy markets “have rapidly moved from pricing in heightened geopolitical risk, to pricing an active and widespread military conflict between the U.S./Israel and Iran”.
“What could have been a relatively contained operation has significantly broadened in scope, and there are significant implications for global energy supplies. The geopolitical risk premium has evolved from theoretical to real”, Ashford warned.
In the report, Ashford said the oil market was well prepared for an escalation.
“There had been a gradual build-up in flat price from the mid $60s per barrel, to the low $70s until late last week. In the options market call skew has outperformed for several weeks,” Ashford noted.
“Flat price Brent crude jumped to over $82 per barrel at its open on 2 March, immediately taking out its 52-week high of $81.40 per barrel, reaching a 13-month intraday high of $82.37 per barrel. It then rapidly retraced to oscillate on headlines between $77-80 per barrel for the rest of the day,” Ashford added.
“On 3 March prices have again pushed higher, with Brent above $85 per barrel for the first time since July 2024 intra-day on a fresh spate of disruption, including a major fire at Fujairah port,” Ashford continued.
The Standard Chartered Bank Energy Research Head went on to state that there were also sharp moves in the refined product markets, “with some cracks and diffs setting near-term records”.
“RBOB gasoline pushed to a 19-month high, and the RBOB-WTI crack reached a 30-month high,” Ashford said.
“ICE gasoil is at a two-year high, and the ICE gasoil-Brent crack reached a three-and-a-half month high. Jet diffs have followed gasoil higher, with the North-West Europe jet diff pushing to its highest for over three years,” Ashford added.
Ashford went on to reveal in the report that, “given the near-term elevated risks to supply and higher tail risk”, the company has adjusted its price forecasts.
“We increase our 2026 average Brent forecast to $70 per barrel (from $63.50 per barrel), our Q1-2026 forecast to $74 per barrel (from $62 per barrel) and Q2-2026 to $67 per barrel (from $63 per barrel),” Ashford stated.
“We increase our 2026 average WTI forecast to $65.50 per barrel (from $59.90 per barrel), our Q1-2026 forecast to $68 per barrel (from $58.50 per barrel) and Q2-2026 to $62.50 per barrel (from $59.50 per barrel),” Ashford said.
Ashford warned in the report that “there is asymmetric upside risk to these forecasts if the conflict escalates further to impair production from Iran and any of the regional producers”.
Rigzone has contacted the White House, Israel’s Ministry of Foreign Affairs, the Iranian Ministry of Foreign Affairs, and the General Secretariat of the Gulf Cooperation Council (GCC) for comment on Zycher, Bandow, and Ashford’s statements. At the time of writing, none of the above have responded to Rigzone.
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