Oil prices could jump to $140 per barrel if Russian crude doesn't get a price cap, US Treasury official says

• Crude prices could jump 40% to about $140 if a Russian price cap isn't implemented, a US Treasury official said, per Reuters.
• On Tuesday, Treasury Secretary Janet Yellen will hold talks with Japanese officials on the price cap proposal.

Oil prices could jump about 40% to $140 a barrel if Russian crude doesn't get hit with a proposed price cap, a senior US Treasury official said Tuesday, according to a Reuters report.

On Tuesday, Treasury Secretary Janet Yellen will hold talks over the price cap proposal with Japanese Finance Minister Shunichi Suzuki. Japanese officials have shown hesitance to adopt a price cap set too low, but have not yet rejected the idea.

In June, G7 leaders discussed a price cap on Russian crude of about $40 to $60 in order to slow down Moscow's funding of its war machine. On Tuesday, the price of Brent crude hovered around $102.

Under the proposal, Europe would leverage its global dominance in shipping and insurance services by limiting availability to them unless buyers of Russian oil observe the price caps.

The US has also proposed an exception to the ban on maritime insurance for imports of Russian crude that are priced below the cap to prevent millions of barrels from being stranded, the Treasury official said Tuesday.

A price cap would be aimed at incentivizing just enough Russia to continue exporting oil as it would cover the country's marginal cost of production, while also cutting its profits for its war in Ukraine.

But for the price cap to work, it will need widespread buy-in from other countries. And analysts have also warned that a cap could prompt Russia to retaliate by cutting off oil exports abruptly to create a spike in prices.