Scott Bessent Predicts Oil Prices Will Drop to $40

U.S. Treasury Secretary Scott Bessent predicts that crude oil prices could drop to between $40 and $50 a barrel once the current conflict between the United States and Iran concludes. He attributes this potential decline to an expected supply surplus as additional production capacity comes online, which he believes will subsequently lower interest rates and reduce headline inflation.

This outlook follows a sharp spike in energy prices, with Brent crude trading above $95 a barrel and West Texas Intermediate near $91. Prices surged over 9% following missile exchanges between the two nations, driving up inflation expectations and pushing the U.S. 10-year Treasury yield to its highest level since 2023.

While Bessent expects a resolution, other officials maintain a harder line. Vice President JD Vance stated that Washington will not pursue peace talks until Iran ceases attacks on ships in the Strait of Hormuz. Additionally, a Republican lawmaker on the House Armed Services Committee characterized the current military situation as "stalled."

Bessent also dismissed concerns regarding a proposal by Norway's sovereign wealth fund to reduce its U.S. Treasury holdings by approximately $75 billion. He suggested the fund is simply seeking higher yields through other American assets, such as bonds from Fannie Mae, Freddie Mac, and Ginnie Mae.