Goldman Sachs Warns: Middle East Conflict Escalates Risks to Crude Oil Supply, Brent Crude Could Soar to $110 per Barrel

On Sunday, Eastern Time, Goldman Sachs stated in a report that the global energy supply is facing increasing risks.

Goldman Sachs expressed significant concern over potential supply disruptions in the Strait of Hormuz, noting that any interruption or reduction in supply would lead to a sharp surge in oil and natural gas prices.

Is the Strait of Hormuz facing a closure crisis?

According to comprehensive media reports, including CCTV News, Kowsari, a member of the National Security and Foreign Policy Commission of the Iranian Parliament, recently stated that the Iranian Parliament has concluded that the Strait of Hormuz should be closed, but the final decision rests with the Supreme National Security Council of Iran.

The Strait of Hormuz, connecting the Persian Gulf and the Indian Ocean, is a crucial global shipping route, often referred to as the "world's oil valve" and the "main valve of the Middle East's oil depot." Currently, approximately one-quarter of the world's oil trade passes through the Strait of Hormuz.

Goldman Sachs believes that even if the Strait of Hormuz is not completely closed, a mere reduction in traffic would drive up oil prices sharply.

Amid concerns triggered by the Middle East conflict, Brent crude oil has surged by 20.6% to $76.9 per barrel this month, reaching a new high since February this year.

Goldman Sachs predicts that if oil traffic through the Strait of Hormuz is halved in the first month and remains 10% lower over the next 11 months, Brent crude oil prices could briefly peak at $110 per barrel.

Risk of Reduced Iranian Crude Oil Supply

Additionally, the firm pointed out that if Iran's daily crude oil production decreases by 1.75 million barrels, Brent crude oil prices could peak at around $90 per barrel.

Goldman Sachs stated that while they still assume no significant disruptions in oil and natural gas supplies, it is undeniable that downside risks to energy supply have emerged, while upside risks to energy prices have also increased.

Currently, the encrypted prediction platform Polymarket indicates that the market now predicts a high likelihood of Iran disrupting the Strait of Hormuz in 2025.

Goldman Sachs also anticipates that the Middle East conflict could impact the European natural gas (TTF) and LNG markets. In the event of a large-scale supply disruption, TTF prices could approach €74 per megawatt hour. As of last Friday, TTF was quoted at around €40.93 per megawatt hour, implying that Goldman Sachs expects TTF to have an upside potential of up to 80%.