Treasury Secretary Scott Bessent made a bold prediction about where oil prices are headed once the conflict with Iran ends. The number he mentioned is one investors have not seriously discussed in years, and it arrived alongside an equally striking claim about interest rates.
His comments came paired with a second claim, about interest rates, that ties directly into how Washington is trying to manage the country’s mounting debt costs.
Bessent predicts oil could crash to $40 a barrel after Iran war
Bessent told former Trump advisor Steve Bannon in an interview that aired September 4 that oil markets will flip from tight to heavily oversupplied once the U.S.-Iran conflict ends.
“We can see $50, $40 crude maybe, just because there’s so much coming online,” Bloomberg reported.
He framed the coming glut as a straightforward supply story rather than a demand collapse. Bessent said he expects oil “will come down” once the country gets “on the other side of this Iran conflict.” Tying the drop to new production capacity without pointing to weakening economic demand as the driver.
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The prediction stands in sharp contrast to where prices actually sit right now. Brent crude was trading above $95 a barrel on September 4, near its highest level since July, while West Texas Intermediate hovered around roughly $91, with both benchmarks sharply higher on the week as renewed U.S.-Iran hostilities raised fears of further disruptions to Middle East oil supplies, according to Bloomberg.
Bessent did not offer a timeline for when the conflict might actually end. One Republican member of the House Armed Services Committee described the military situation as “stalled” just days before the interview aired.
The oil-rates connection Bessent is banking on
Bessent’s forecast leans heavily on a relationship he says has become unusually tight this year, calling it the highest correlation interest rates have ever had to oil prices, and arguing a drop in crude would pull bond yields down alongside it.
That correlation matters because yields have been climbing sharply. The 10-year Treasury yield reached its highest level on August 31 since 2023, as renewed Middle East tensions fed inflation worries across global markets, as reported by Seeking Alpha.
Bessent has already taken direct action to manage that yield pressure. The Treasury announced it would double the size of its buyback operations for longer-dated debt in August, a move that briefly pulled the 30-year yield down from a 19-year high after it had climbed above 5.3%.
The stakes behind that intervention keep growing. Net interest costs on federal debt reached $857 billion in fiscal 2026 through June alone. A bill that can keep rising as higher yields feed into refinancing costs and leaves less room in the budget for other priorities, TheStreet reported.
Norway’s wealth fund adds a wrinkle to Bessent’s yield story
Bessent’s push for lower yields came alongside a second, less discussed topic in the same interview: Norway’s sovereign wealth fund.
The fund’s managers have proposed cutting the government bond share of their benchmark from 70% to 50%, according to CNBC. A shift that would trim roughly $80 billion from the fund’s Treasury holdings.
Bessent downplayed the move, framing it as a routine portfolio decision rather than a vote of no confidence.
“They’re just looking to upgrade their yield with other American assets,” he said, adding that he would be “the biggest advocate” if the fund shifted money into mortgage bonds backed by Fannie Mae and Freddie Mac instead, according to Seeking Alpha
Not everyone reads the move as harmless. Economist Mohamed El-Erian told CNBC that the dollar size of Norway’s shift matters less than the signal it sends that “traditional holders and buyers are becoming less reliable,” Quartz reported.
The backdrop makes that signal harder to dismiss. U.S. national debt has already topped $40 trillion months earlier than the Congressional Budget Office had projected. And the federal deficit is on pace to hit $2.1 trillion this fiscal year with no clear sign of that trend reversing.
What it means for investors
If Bessent’s forecast plays out, the ripple effects would extend well beyond gas station prices.
Energy analysts have already shown how quickly oil forecasts can swing this year. Citi alone warned that Brent could reach in April from a possible $150 a barrel in a bull-case scenario if disruptions in the Strait of Hormuz persisted through June, illustrating how sensitive these forecasts remain to geopolitical developments that can reverse within weeks. The bank has since revised its numbers again more than once as the conflict dragged on.
A genuine move toward $40 oil paired with falling yields would be a welcome combination for markets broadly, easing inflation pressure and lowering borrowing costs for companies and households alike.
But that outcome depends entirely on the Iran conflict actually winding down, something Bessent’s own administration has not been able to predict with confidence.
For now, investors are left weighing a Treasury secretary’s optimistic case against a war that has already dragged on longer than officials expected, a major foreign wealth fund quietly trimming its Treasury exposure, and yields that remain stubbornly elevated regardless of what happens next in the Gulf.
Related: Goldman Sachs expresses doubts about Scott Bessent’s plan