An all-out war between Israel and Iran could drive oil prices up by $30-$40 per barrel, Bank of America experts have told clients in a research note seen by CNBC.

Tehran and West Jerusalem have traded threats since Iran conducted its first direct military attack on the Jewish state last weekend, in retaliation for a suspected Israeli airstrike on the Iranian diplomatic mission in Syria earlier this month.

If hostilities escalate into a protracted conflict that impacts energy infrastructure and disrupts Iranian crude supplies, the price of global benchmark Brent could rise “substantially” to $130 in the second quarter of this year, a Bank of America research note stated on Tuesday, according to CNBC. It added that US crude oil could soar to $123.

The scenario reportedly assumes that Iranian oil production falls by up to 1.5 million barrels per day (bpd). According to the International Energy Agency (IEA), Iran, a founding member of the Organization of the Petroleum Exporting Countries (OPEC), produces about 3.2m barrels of oil a day. Last year it ranked as the world’s second largest source of supply growth after the US.

If a conflict led to disruptions outside Iran, such as the market losing 2 million bpd or more, prices could spike by $50 a barrel, according to the note. Brent would eventually settle around $100 in 2025, while US benchmark West Texas Intermediate (WTI) would come down to $93, it predicted.

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