Oil prices would need to surge far beyond current levels to trigger meaningful demand destruction, according to a note from Bernstein on Tuesday.

Analyst Irene Himona writes that “in today’s money we would need $155/bbl as the FY26 annual average, to reach the same 5.2% oil burden” last seen in 2007, the level at which high prices historically begin to erode consumption.

The report frames the recent spike in Brent as part of an evolving “war-price discovery” process following the start of the Iran conflict.

Brent, which hovered at $80–$85 in the first days of the war, “rapidly spiked to $94/bbl” before opening at $110 on Monday and then easing to $100.

Himona attributes the shift to unprecedented operational risk, noting that the Strait of Hormuz was closed for the first time ever, which quickly forced upstream production shutdowns in Iraq, the UAE and Saudi Arabia as storage approached capacity.

Bernstein estimates that losing “20% of global oil (and LNG) for a prolonged period” would push the 2026 Brent average above $90/bbl for a three-month stoppage and above $110/bbl for six months, with spikes much above that average.

The escalation of direct attacks on infrastructure, including Saudi Arabia’s 550kbd Ras Tanura refinery and Qatar’s LNG facilities, marks, in Bernstein’s view, a “true crisis mode” comparable only to Kuwait’s oil sector destruction in 1991.

Despite the turmoil, Himona expects oil companies’ first-quarter investor distributions to remain largely unchanged, with excess cash likely directed toward debt reduction.

But she warns that if the war persists, markets will eventually start pricing an economic slowdown/recession, causing the sector to trade more like the broader equity market.
Source: Investing.com