BlackRock's Larry Fink says oil could drop to $40 if the Iran war ends right — or stay near $150 for years. Which should you prepare for?

When asked for his thoughts on the current conflict, Fink revealed that he sees it going one of two ways: the war ending and bringing oil prices down or the war continuing with an unchanged regime that keeps oil prices high for years to come.

The national average for a gallon of regular gas has climbed to nearly $4 according to AAA (1) — up more than a dollar in March alone and 27% higher than a year ago.

"I could paint a scenario where I could see, a year from now, oil at $40 a barrel," Fink described (2). "I could see it above $150. We have two very extreme outcomes." He went on to explain that there's not going to be an outcome somewhere in the middle.

Best-case scenario

In scenario one, the war would come to an end and Iran would become a part of the world community. They would reopen the Strait of Hormuz, release their oil and oil prices would go down.

Using the EIA's rule of thumb that every $1 change in oil prices translates to roughly 2.4 cents per gallon at the pump (3), Fink's $40-a-barrel scenario could mean gas prices dropping to around $2.40 — levels not seen since the pandemic recovery in early 2021.

The closure of the Strait of Hormuz, which carries 20% of the world's oil supply, has caused the largest supply disruption in the history of the global oil market according to the International Energy Agency (4). Reopening this vital passageway is key for both the resolution of this conflict and the economy.

What it comes down to, according to Fink, is whether Iran can be accepted by the international community. "Can Iran be a country that participates in the world again? Can Iran be a country in which they are peacefully working side by side across the Persian Gulf with the GCC [Gulf Cooperation Council]?" he said. "That is one very big outcome."

Fink admits that no one knows what will happen while he brings a potential, albeit optimistic, viewpoint that there could be a promising result for the global economy if Iran can become a welcomed part of the world.

"If that outcome occurred then you'd have the Iranian oil back into the marketplace alongside with the growth of the Venezuelan oil and you could paint a picture where oil prices could be lower than where they were prior to the Iranian war."

This would be a best-case scenario for the global economy, including the United States.

Worst-case scenario

On the opposite side is scenario two, where the war and/or current regime would continue to directly impact oil prices and keep them high for years to come.

Fink warns that "if Iran wants to continue to be an exporter of fear, then that's a very different outcome."

At $150 a barrel, that same math suggests gas prices could push past $5 a gallon nationally — territory only a handful of states like California and Hawaii have seen so far. Oil prices don't just hit drivers at the pump, either. Diesel fuels the trucks that stock grocery shelves and natural gas and petroleum are key inputs in fertilizer production. When energy costs climb, food prices tend to follow — and at $150 a barrel, that pressure would be felt on everything from eggs to bread.