Oil Prices Soar as US-Iran Tensions Escalate

Oil prices surged to over $91 per barrel on Tuesday as hopes for a US-Iran peace deal faded. Brent crude futures rose 39 cents, or 0.4%, to $91.26, while US West Texas Intermediate crude futures jumped 51 cents to $85.31 a barrel.

The gains come amid escalating tensions between the two nations, with Iran declaring it will adopt a more aggressive military posture and the US ruling out extending a ceasefire agreement. The stalemate has raised concerns about energy supply disruptions through the Strait of Hormuz, a key oil transit route.

Goldman Sachs warned that Brent could reach $120 a barrel if shipping disruptions continue, while JPMorgan estimates that every additional month of disruption could add around $7 to $8 a barrel to Brent prices. The bank forecasts average monthly Brent prices to reach around $114 a barrel if the disruption lasts for three months.

Despite these warnings, Goldman Sachs expects tensions in the Middle East to eventually ease under its base case scenario, forecasting Brent to average $80 a barrel in the fourth quarter and $75 a barrel next year. However, it noted that risks remain tilted to the upside due to potential disruptions through the Strait of Hormuz.