Goldman Sachs Flags $120 Oil Risk as Middle East Tensions Escalate

Goldman Sachs warns that oil prices could surge to $120 a barrel if attacks on Middle East shipping escalate, according to a report from Bloomberg. The bank's co-head of global commodities research, Daan Struyven, notes that recent developments indicate a meaningful risk of shipping disruptions expanding and intensifying.

Crude oil has risen to its highest level since July as the US and Iran remain locked in a standoff over the Strait of Hormuz. Brent crude was last trading near $92 at the time of writing this report. Struyven advises investors to hedge against geopolitical risks by going long on global natural gas and refined-oil products, as supply disruptions are larger in those markets than in crude.

Goldman Sachs also sees oil prices falling to $80 a barrel if regional exports return to normal, according to Struyven. The US-Iran conflict has already lifted a broad range of energy prices, with natural gas and petroleum products outperforming crude. Industrial fuel diesel has more than doubled this year.