Thedeepening trade warbetween the United States and China could deal a double shock to the fragile oil market.The tit-for-tat tariffs havealready sent crude prices plungingbecause of fears of asevere global economic slowdownor even recession in the United States that could dent alreadyanemic demand for oil.But there could also be a supply shock coming. Bank of America Merrill Lynch warned that China could retaliate against US tariffs by purchasing vast amounts of oil from Iran in defiance of Washington’s sanctions on the OPEC nation.

If China ignores US sanctions, Iran oil could flood the market.”

BANK OF AMERICA COMMODITY STRATEGIST FRANCISCO BLANCH

The one-two punch would cause Brent oil to crash from $60 a barrel today to just $40, Bank of America wrote in a note published on Friday.

“A Chinese decision to re-initiate Iran crude purchases could send oil prices into a…