Oil’s $110 Ceiling? Goldman Sachs Sees Price Surge on Hormuz Cut

A new forecast from Goldman Sachs indicates that oil prices could reach $110 a barrel, but only under the dire scenario of a significant and prolonged disruption to the Strait of Hormuz. Specifically, the bank estimates this surge if oil flows through the critical waterway are halved for a month and then remain down 10% for the following eleven months. This projection highlights the potential for severe economic consequences should Iran follow through on its threat to shut down the strait. The IMF chief, Kristalina Georgieva, has warned that US strikes on Iran could significantly damage global growth.
The Strait of Hormuz is a vital shipping channel responsible for a fifth of the world’s oil consumption. The Iranian parliament’s recent vote to consider closing it, in retaliation for a US attack, poses a serious threat of an oil supply shock, which would undoubtedly push up energy prices, exacerbate inflation, and impede global economic expansion.
Oil markets initially reacted with a jump of over 5% on Sunday, hitting a five-month high of $81.40. However, prices later retreated, with Brent crude falling nearly 1% to just over $76 a barrel on Monday. This volatility reflects the ongoing uncertainty and the market’s attempt to price in the complex geopolitical landscape.
Against this backdrop, US Secretary of State Marco Rubio has forcefully stated that closing the strait would be “economic suicide” for Iran, urging China to influence Tehran given its heavy reliance on Hormuz for oil. Analysts at RBC Capital Markets have also advised against complacency, warning of “clear and present risk of energy attacks” from Iranian-backed groups and noting the fluidity of the situation, as evidenced by the reported U-turn of two supertankers in the strait.