Oil prices could climb to $120 per barrel if attacks on shipping in the Middle East increase and disruptions around the Strait of Hormuz persist, according to Goldman Sachs.
The investment bank has warned that the growing risk of shipping disruptions in the region has become an important concern for global oil markets. Brent crude was trading above $97 per barrel at the time of reporting, reaching its highest level since July.
According to Goldman Sachs’ co-head of global commodities research, recent developments indicate that shipping disruptions could expand and intensify, creating further upside risks for crude prices.
Tensions around the Strait of Hormuz have escalated in recent days, with the United States attacking Iranian tankers and Tehran announcing a new restricted zone outside the key waterway.
Goldman Sachs has maintained an upside oil price scenario of $120 per barrel if disruptions around Hormuz continue. However, the bank also sees a downside scenario of $80 per barrel if oil exports from the region return to normal levels.
The prolonged standoff has also pushed prices of other energy products higher. Natural gas and refined petroleum products have recorded stronger gains than crude oil, while diesel prices have more than doubled this year.
Goldman Sachs is recommending that investors consider positions in European natural gas and refined oil products as a hedge against increasing geopolitical risks.
The bank expects China to act as a stabilizing force in the crude oil market by reducing imports in response to higher prices. However, Goldman does not expect China to play the same role in natural gas and refined petroleum products.
The outlook highlights the growing sensitivity of global energy markets to developments around the Strait of Hormuz, with any prolonged disruption potentially putting further upward pressure on oil prices.
