Goldman Sachs: Oil Prices Could Reach $120 as Tensions Escalate
Oil prices are set to rise further as tensions between the United States and Iran escalate and concerns grow over disruptions to crude supplies in the Gulf region, while Goldman Sachs has warned that oil prices could reach $120 per barrel if attacks on oil tankers and ships become more widespread and intense.
This warning comes as the price of Brent crude approaches the $100-per-barrel mark, amid rapid shifts in the geopolitical landscape and a shift away from diplomatic efforts between Washington and Tehran in favor of sanctions and military and economic pressure.
Goldman Sachs Raises Oil Price Forecast to $120
Goldman Sachs has significantly revised its outlook on the oil market in recent months, shifting from forecasting lower crude prices to warning that prices could reach $120 per barrel in the near term.
This shift came amid escalating risks related to oil supplies in the region, particularly as tensions persist in the Strait of Hormuz, one of the most critical maritime corridors for global energy trade.
According to the bank’s estimates, oil reaching $120 per barrel becomes a real possibility if attacks targeting ships and oil tankers expand or intensify, leading to disruptions in the flow of supplies.
The Deterioration of Diplomatic Relations Between Trump and Iran Heightens Concerns in Oil Markets
Goldman Sachs’ forecast comes on the heels of a clear shift in U.S. policy toward Iran, as U.S. President Donald Trump has moved away from diplomacy toward the use of sanctions, military pressure, and an economic blockade.
The proposed measures include restrictions on Iranian imports and exports, as well as the idea of establishing a new no-fly zone spanning the Arabian Gulf and the Gulf of Oman.
The expansion of these restrictions would increase the risks associated with oil tanker traffic in the region, which could quickly affect global oil prices if it disrupts supplies or raises shipping and insurance costs.
Brent Crude Approaches $100 per Barrel
The price of Brent crude rose to nearly $99 per barrel on Monday, hitting its highest level since late July, amid mounting concerns over oil supplies from the Gulf region.
The gains followed U.S. strikes over the weekend that targeted three Iranian oil tankers, while Saudi Aramco was attacked on Monday.
These developments highlight the growing risks facing the region’s energy infrastructure and oil tanker traffic, especially if the attacks continue or expand to include more ships and oil facilities.
Why Might Oil Reach $120?
The scenario of oil prices reaching $120 is primarily linked to the actual impact of geopolitical tensions on global supplies.
Several factors could push prices toward this level, most notably:
- An expansion of attacks on oil tankers
- Increased risks in the Strait of Hormuz
- Disruption of Iranian oil exports
- Rising shipping and insurance costs
- Attacks on oil facilities in the Gulf region
- New restrictions on shipping
- A sudden drop in global supply
The Strait of Hormuz, in particular, is one of the most critical chokepoints in global energy trade; therefore, any prolonged disruption to shipping traffic through it could lead to an increase in the risk premium on oil prices.
Iran Seeks New Tactics to Escalate the Confrontation
At the same time, Iran is considering new tactics that could escalate the confrontation, further increasing uncertainty in the energy market.
Markets are closely monitoring any developments that could affect shipping or oil exports from the region, as continued escalation could prompt traders to price in greater risks associated with supply shortages.
This could cause oil prices to remain high even if there is no actual supply shortage, as future concerns alone could prompt energy companies and traders to increase their risk premiums.
Trump Expects Oil Prices to Fall Despite Goldman Sachs Warning
Goldman Sachs’ warning stands in stark contrast to U.S. President Donald Trump’s statements regarding the future of energy prices.
On Monday, Trump predicted that oil prices would fall sharply, noting that gasoline prices in the United States—which average about $4.15 per gallon nationwide—could first drop to $3 and then to $2 per gallon.
The discrepancy between Trump’s statements and Goldman Sachs’ forecasts reflects a significant difference in the assessment of future risks to the energy market, particularly regarding the implications of U.S.-Iran tensions on global supplies.
The Impact of Rising Oil Prices on the Global Economy
The impact of rising oil prices may not be limited to energy markets alone; it could extend to the global economy through increased transportation and production costs.
Rising crude prices typically lead to higher fuel and energy costs, which may be passed on to the prices of goods and services and increase inflationary pressures.
Furthermore, persistently high oil prices may pose greater challenges for central banks, especially if rising energy costs slow the decline in inflation rates.
For this reason, financial markets closely monitor oil price movements, not only from a supply-and-demand perspective but also because of their potential impact on interest rates, inflation, and global markets.
Oil Price Forecasts for the Coming Period
Oil price forecasts for the coming period appear to be primarily linked to geopolitical developments in the Middle East.
In a positive scenario, successful diplomatic talks and an easing of tensions could lead to a decline in the risk premium and a drop in crude prices from their current high levels.
In the most extreme scenario which involves continued and escalating attacks and disruptions to oil tanker traffic the market may be forced to reprice supply risks, making a price of $120 per barrel a possibility that cannot be ruled out.
