Analyst warns oil could hit $200 per barrel

With the U.S.-Iran tensions reaching a new high, things could get messier for oil.

That's essentially the warning coming from Bank of America's top commodities strategist, Francisco Blanch, who says oil prices could spike dramatically if tensions involving Iran drag on.

And not just a little spike.

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Oil to climb to new highs

At the time of writing, WTI crude oil was about $96 per barrel, while Brent crude had climbed to $109. But the real concern isn't where prices are but what happens next.

In a recent Bloomberg interview , Blanch says if the conflict stretches into the coming months, oil markets could enter a much more volatile phase. 

The biggest risk is the disruption in the Strait of Hormuz, a narrow passage that handles about 20% of the world's oil supply.

If that flow gets interrupted, supply tightens overnight. Prices react instantly.

There's also a bigger shift happening under the surface.

Blanch points out that countries may start rethinking how they handle commodities altogether. Instead of relying on "just-in-time" supply chains, governments could start hoarding resources, especially oil, as a safety net.

We've already seen hints of this with China building reserves.

If that trend accelerates, it could keep oil prices elevated even after the conflict ends.

"If we are still in the same place in May, looking into the third quarter, I've already mentioned we could see spikes to a $160 a barrel. If things keep going, we could see Brent breaking $200 a barrel,"Blanch said.

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Real risk of oil price hike

Higher oil prices don't just hit gas stations. They ripple across the entire economy.

Transportation costs rise, making it more expensive to move goods around the world. As a result, everyday products become more expensive, putting additional pressure on consumers. At the same time, inflation remains stubbornly high instead of cooling down.

And when inflation sticks around, central banks don't cut rates; they keep policy tight.

In fact, just two days ago, the Federal Reserve decided to keep the rates steady between 3.5% and 3.75%.

Blanch warned,

"We need to see this war coming to an end, because if we don't, I think the risks of recession will grow by the week as we head into April."

Blanch joins Moody's chief economist Mark Zandi and Federal Reserve governor Christopher Waller, who are also sounding alarms on an impending recession.