Brent crude could rise all the way to $100 and more, peaking at $110 per barrel in case Iran closes the Strait of Hormuz, Goldman Sachs said in a new note.
The investment bank said this price could materialize if oil flows via the vital chokepoint were cut by half for a month and remained 10% lower than normal over the next 11 months. This is a rather specific forecast that may not be the most likely scenario for developments of the Middle East but some disruption in oil flows seems all but certain at this point.
After the initial price shock under Goldman’s scenario, Brent would moderate to $95 per barrel over the final quarter of this year, the bank’s analysts also said, as quoted by Reuters. This is a substantial revision of an earlier forecast for oil prices made by the bank last week. Then, Goldman Sachs estimated a geopolitical premium of approximately $10 per barrel on Brent crude, though it suggested oil could exceed $90 if Iranian supply were disrupted.
The investment bank estimated the chance of Iran shutting down Hormuz at 52%, citing data from crowd-sourced prediction platform Polymarket. That same platform, by the way, pegs the chance of the United States officially declaring war on Iran before the end of the month at just 2%.
Crude oil prices, meanwhile, opened trade this week with an unsurprising gain, with Brent crude trading at over $78 per barrel at the time of writing, and West Texas Intermediate at $75.24 per barrel.
“An oil price jump is expected,” Jorge Leon, head of geopolitical analysis at Rystad Energy, told Reuters. “Even in the absence of immediate retaliation, markets are likely to price in a higher geopolitical risk premium.”
“The direction of oil prices from here will depend on whether there are supply disruptions – which would likely result in higher prices – or if there is a de-escalation in the conflict, resulting in a fading risk premium,” UBS’s Giovanni Staunovo said.
By Irina Slav for Oilprice.com
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