KEY POINTS
  • Bank of America Merrill Lynch warns the oil price could slip sharply if China buys Iranian oil.
  • Beijing could undermine Washington's foreign policy stance by ignoring U.S. sanctions placed on Iran.
  • BofA is keeping its $60 per barrel price estimate in place for 2020.
Tugboats dock the oil tanker "Daniel" carrying crude oil imported from Iran at the Port of Zhoushan in Zhoushan city, east China's Zhejiang province, 8 March 2018. 

Crude oil prices could sink by as much as $30 a barrel if China decides to buy Iranian crude oil in retaliation to the latest U.S. tariff measures, according to Bank of America Merrill Lynch.

"While we retain our $60 a barrel Brent forecast for next year, we admit that a Chinese decision to reinitiate Iran crude purchases could send oil prices into a tailspin," a BofA Merrill Lynch Global Research report said Friday, warning that prices could sink by as much as $20-30 a barrel in that scenario.