Oil headed to $85-90 per barrel in the near term, says BCA Research

Oil prices could climb to $85 or even $90 per barrel soon, according to Marko Papic, Chief Strategist at BCA Research. Speaking about risks in the Middle East, he said investors should pay close attention to Iran, not Israel or the US.“Iran is either going to try to take oil barrels off the global market by interjecting the flow of oil through the Straits of Hormuz, or it’s not,” Papic said. If Iran attempts to block oil shipments, the US is likely to respond forcefully. “A retaliation that will make Israel’s attack look like a bee sting compared to a grizzly attack,” he added.
However, Papic pointed out that Iran has never blocked the Strait of Hormuz in its 46-year history, calling such a move “the nuclear option” with limited room for escalation. “You always have to escalate first to de-escalate,” he noted, but emphasised that no one is likely to invade Iran or push for regime change militarily.
Also Read | Lower oil prices will not impact flow of orders from Middle East: L&TOn the market impact, Papic dismissed concerns about equities despite the potential oil price spike. “If oil prices go to $150 per barrel, the S&P 500 will fall. You have to close your eyes and buy on that,” he said. He believes any disruption to oil flows would be temporary and not enough to shift central bank policy.

Discussing the US dollar, Papic pointed to a structural weakening trend. Despite events that should traditionally boost oil or weaken the dollar, such as missile exchanges between Israel and Iran, markets have reacted only mildly. “We are in a structural, secular shift,” he said, predicting a 20% decline in the dollar against major currencies over the next three years.

He expects capital to flow into Europe, Japan, and emerging markets. When the flows move into an economy, the currency appreciates. When a currency appreciates, the central bank gets to cut interest rates. Then you get entrepreneurship and business growth, he said, highlighting the potential benefit for countries like India.

Also Read | ANZ economist views oil price jump as a market reset, not a shock

On geopolitics, Papic advised not to assume a permanent US-India alliance. He described US foreign policy, particularly under US President Donald Trump, as interest-driven rather than relationship-based. “There are no real allies, there are no real enemies, there are just interests,” he said.

He also speculated that the recent unusual diplomatic meeting between Pakistan Army Chief Asim Munir and US President Donald Trump might have more to do with Iran and Pakistan than India. “This may not be concerning India–US relationship or India–Pakistan relationship,” he said, pointing to long-standing military connections between the US and Pakistan.

For the full interview, watch the accompanying video

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