Three oil price scenarios from the Iraq crisis

The situation in Iraq could play out in many ways. In a “good” scenario, the crisis would ease soon and there could even be some positive fallout for the region. (Our current forecast that Brent will drop back below $100 per barrel within the next 6-12 months assumes a benign outcome.) In a “bad” scenario, continued uncertainty would see oil prices grind higher to the $120 level that previously has been followed by a slowdown in the global economy. However, in an “ugly” scenario, where the bulk of Iraqi supply is lost, the price of Brent could easily surge to new record highs above $140.