Goldman Sachs warns oil could hit $120 amid Mideast shipping attacks

Goldman Sachs The Goldman Sachs Group, Inc. ↘ 1.38% warned on Sunday that oil prices could surge to $120 per barrel if attacks on shipping in the Middle East escalate further, as renewed fighting between the United States and Iran rattles energy markets already strained by months of conflict around the Strait of Hormuz.

"Events over the last few days do suggest that the risk of shipping disruptions broadening and intensifying is an important one," Daan Struyven, co-head of global commodities research at Goldman Sachs, said in an interview on Bloomberg TV.bloomberg

A $40 Swing Between Scenarios

The bank outlined two divergent paths for crude prices. In what it called an "upside scenario," oil reaches $120 a barrel if shipping attacks spread. In a downside case, prices could fall to $80 should exports from the region return to normal levels, according to Bloomberg's reporting. Brent crude traded near $97 per barrel early Monday, while West Texas Intermediate hovered above $92.oilprice+1

Goldman recommended that investors hedge geopolitical risks by going long on natural gas and refined oil products rather than simply chasing crude higher. "The supply shocks are bigger than in the crude market," Struyven said. Diesel prices have more than doubled this year, with U.S. retail diesel hitting record highs last week.energyconnects+1

Escalation Fuels the Rally

The warning comes after a monthlong lull in U.S.-Iran hostilities ended in late August with a fresh exchange of strikes. The U.S. military struck Iranian tankers and military targets around the Strait of Hormuz, while Iran's Islamic Revolutionary Guard Corps targeted U.S. warships with ballistic missiles. Iranian parliament speaker Mohammad Bagher Qalibaf warned that the era of "proportionate responses" is over, and Mohsen Rezaei, the new head of Iran's Supreme National Security Council, announced plans for an "exclusion zone" extending toward the Strait of Hormuz.CNN+2

Tanker traffic through the strait has dropped to levels not seen since May, according to Goldman's analysis. For the week ending Friday, Brent crude rose 7.6% and WTI gained nearly 10%, according to Reuters.moomoo+1

Broader Economic Risks

The rally extends well beyond crude. Goldman noted that China is expected to act as a "stabilizing force" by reining in oil imports at elevated prices, but is not playing the same role in natural gas and refined products. If energy prices continue climbing, U.S. inflation could face renewed upward pressure, complicating Federal Reserve policy decisions at a time when August jobs data already came in stronger than expected.moomoo+1

Still, Goldman cautioned that $120 represents a stress scenario rather than a base case. Any ceasefire or resumption of normal shipping could rapidly deflate the risk premium built into current prices.moomoo