Goldman Sachs warns that oil prices could surge if disruptions occur in the Strait of Hormuz, the narrow waterway through which a significant portion of the world’s crude oil is transported.
The investment bank outlined two potential scenarios:
– If shipments through the strait were reduced by half for one month, oil prices could spike to $110 per barrel.
– If Iran’s oil output fell by 1.75 million barrels per day, prices could climb to $90 per barrel.
Why is this a concern now? Tensions in the Middle East have increased following recent U.S. and Israeli military actions involving Iran, and Tehran has threatened to close the strait. A closure or substantial disruption would reverberate across global energy markets.
The regional impact would differ by market. European natural gas prices could rise sharply, potentially reaching around 74 euros per megawatt-hour, while U.S. gasoline consumers would likely face less immediate pain because the United States has substantial domestic natural gas production and strong export capacity.
Despite these upside risks, Goldman Sachs projects that oil prices would eventually moderate, expecting an average near $95 per barrel by late 2025. Nevertheless, the bank cautions that any significant interruption to shipping through the Strait of Hormuz could produce a rapid and severe price shock before markets adjust.