What is Capital Economics' extreme scenario forecast for Brent crude oil prices, and what conditions would trigger it?

Capital Economics forecasts that in an extreme scenario where the Iran war escalates beyond its baseline and adverse scenarios, Brent crude prices could rise above $150 per barrel and remain around that level until the end of 2027. This scenario is triggered by a significant escalation of the Iran conflict leading to severe disruption of energy infrastructure and supply flows, particularly through critical chokepoints like the Strait of Hormuz.

According to Capital Economics, what would be the impact on headline inflation in advanced economies if Brent crude reaches $150 per barrel by late 2027?

Capital Economics estimates that if Brent crude remains around $150 per barrel into 2027 under the extreme scenario, headline inflation for advanced economies would rise by approximately 2.5 percentage points on average in the second half of that year.