Bessent: Oil Prices Could Drop to $40 After Iran Conflict Ends, Potentially Pulling Down Treasury Yields
nashnova research
Treasury Secretary Bessent forecasts oil dropping to $40–50/barrel once the Iran conflict ends, noting that the correlation between oil prices and Treasury yields is at an all-time high — meaning a crude sell-off would pull bond yields down from their current multi-year peak.
Why does Bessent think oil could be cut in half?
In an interview with Steve Bannon, Bessent said the oil market will be severely oversupplied once the Iran conflict ends, pushing crude to $50 or even $40 a barrel.
This means → he is not betting on weaker demand; he is betting that supply held back by the conflict will flood the market once fighting stops.
Brent crude currently trades above $95/barrel; WTI sits near $91 — both at highs not seen since July. In plain terms = if Bessent is right, oil prices would halve from here.
What does cheaper oil have to do with Treasury yields?
Bessent pointed out that the correlation between Treasury yields and oil prices is at a historic high.
This means → oil up → inflation expectations up → bond yields follow; reverse the oil move and the whole chain reverses.
This week the 10-year Treasury yield hit its highest level since 2023. In plain terms = Bessent is sketching a transmission chain: ceasefire → oil crash → inflation cools → bond market loosens up.
Norway's sovereign fund cutting Treasuries — does Bessent care?
Norway's sovereign wealth fund has proposed trimming its Treasury holdings — Bloomberg estimates the shift could involve roughly $75 billion.
Bessent played down the impact: the fund is not abandoning U.S. assets but swapping Treasuries for Fannie Mae and Freddie Mac agency bonds to pick up extra yield.
He called himself "the biggest supporter" of the move. This means → the money is not leaving the U.S. debt system — it is shifting from Treasuries to agency debt, limiting the real impact on America's borrowing capacity.
Can this logic actually play out — what is the key variable?
Bessent's entire thesis rests on one premise: a material de-escalation of the Iran conflict.
If a ceasefire keeps slipping, the supply locked up by the conflict stays locked up, oil stays elevated, and every link in his chain breaks.
In plain terms = this is not an economic forecast — it is a geopolitical bet. If he is right, oil and Treasury yields fall together; if he is wrong, both stay pinned at elevated levels.
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