Goldman Sachs Sees $120 Oil if US-Iran Conflict Escalates

Goldman Sachs warns that Brent crude could surge to $120 per barrel if US-Iran hostilities continue to disrupt shipping in the Strait of Hormuz. This projection is based on Goldman's analysis, which suggests that a sustained disruption through the world's most critical energy chokepoint would reignite global inflation and severely strain import-dependent economies.

The current deadlock over the Strait of Hormuz has forced commercial vessels to alter routes, inflating insurance premiums and delaying deliveries. Goldman's modeling presents a bifurcated outlook, with Brent crude prices potentially reaching $120 per barrel if regional hostilities degrade further or dropping back down to $80 per barrel if there is a swift diplomatic resolution and normalization of exports.

Goldman Sachs recommends that investors looking to hedge against these geopolitical risks should take long positions in global natural gas and refined petroleum products, particularly industrial diesel. The rationale behind this recommendation is rooted in supply chain mechanics, with the supply shocks in the refined product markets being structurally deeper than in crude extraction.