Goldman Sees Oil Hitting $120 if Middle East Tanker Attacks Escalate

Goldman Sachs has warned that crude oil prices could surge to as high as $120 per barrel if attacks on vessels in the Middle East intensify and further disrupt shipments from one of the world’s most important energy-producing regions.

Daan Struyven, co-head of global commodities research at Goldman Sachs, said recent attacks involving vessels in and around the Strait of Hormuz have increased the risk that shipping disruptions could broaden and become more severe.

The warning comes as renewed hostilities between the United States and Iran push crude prices higher and reduce tanker movements through the Strait of Hormuz, a critical waterway that handled about one-fifth of global oil supplies before the conflict.

Brent crude climbed $1.20, or 1.25 percent to $97.48 per barrel on Monday morning, while US West Texas Intermediate crude gained $1.14, or 1.25 percent to $92.62 per barrel.

Prices had already recorded strong gains last week with Brent advancing 7.8 percent and WTI rising nearly 10 percent as traders priced in the growing possibility of prolonged supply disruptions.

Goldman’s $120 scenario would represent another substantial increase from current levels and could have significant consequences for inflation, economic growth and monetary policy globally.

However, the investment bank is not presenting $120 oil as its base-case expectation.

Struyven said crude prices could instead fall toward $80 per barrel if oil exports from the Middle East return to normal levels, highlighting the unusually wide range of possible outcomes facing the market.

The difference between the two scenarios increasingly depends on shipping.

Recent military exchanges have moved closer to commercial energy infrastructure, increasing concerns that vessels transporting crude and petroleum products could face greater risks.

US forces struck three Iranian oil tankers on Saturday, while Iranian forces said they targeted vessels travelling through unauthorised routes as well as US military ships.

The escalation has already affected traffic through the Strait of Hormuz.

An average of only 10 commodity vessels per day crossed the waterway over the past 10 days, the lowest level since May, according to Kpler data.

Traffic fell even further over the weekend, with only two vessels transiting the strait on Saturday and six on Sunday.

The decline is significant because Middle Eastern producers depend heavily on the waterway to move crude and petroleum products to international buyers.

Any sustained reduction in tanker traffic can therefore tighten global supply even when producing countries maintain output.

Iran has added another layer of uncertainty by announcing plans to establish a new restricted zone in the Gulf and introduce new shipping routes through the Strait of Hormuz.

Further restrictions or attacks could discourage shipowners from entering the region and increase insurance, freight and other transportation costs.

Goldman said developments over the past several days suggest that the possibility of broader shipping disruptions has become an increasingly important risk for the oil market.

The bank is also recommending exposure to natural gas and diesel as alternative ways for investors to position for further increases in energy prices.

Diesel has become particularly sensitive to the Middle East disruption as refinery outages, constrained crude supplies and attacks affecting Russian energy infrastructure tighten the international market for refined petroleum products.

A prolonged disruption could therefore produce an energy shock extending beyond crude oil.

Higher diesel prices would raise transportation, agricultural and industrial costs, while more expensive natural gas could increase electricity and manufacturing expenses in major importing economies.

The potential impact of $120 oil would also extend into monetary policy.

A sustained increase in crude and refined-product prices could revive inflationary pressures at a time when major central banks are attempting to determine whether price growth has been brought under sufficient control.

Higher energy costs could make interest-rate reductions more difficult and potentially force policymakers to maintain restrictive monetary conditions for longer.

Oil-importing economies would face additional pressure through larger import bills and weaker consumer purchasing power.

For exporters such as Nigeria, the consequences would be more complex.

A move toward $120 per barrel could substantially increase Nigeria’s crude export earnings, strengthen foreign-exchange inflows and improve government oil revenue, provided the country maintains or increases production.

It could also make Nigerian crude increasingly attractive to buyers seeking alternatives to Middle Eastern barrels disrupted by the conflict.

However, Nigeria would not be insulated from the broader consequences.

Higher international prices for refined petroleum products, shipping and other imported inputs could increase domestic costs and create additional inflationary pressure.

The latest warning comes as OPEC+ has decided to keep its oil-production policy unchanged for October rather than adding another scheduled increase in output.

With tanker movements constrained, the ability of additional production to stabilise the market is also limited if barrels cannot move freely from Middle Eastern export terminals to international buyers.

The Strait of Hormuz will therefore remain central to the direction of crude prices.

A sustained recovery in exports could pull prices back toward Goldman’s $80 scenario.

But if attacks on tankers intensify and shipping traffic deteriorates further, the bank sees a pathway toward $120 oil, potentially transforming the current supply disruption into a much broader shock for the global economy.