Brent crude could hit $110 if oil flow through Strait of Hormuz halved
Oil prices could surge to new highs, Goldman Sachs has warned, after the US attacked three sites in Iran spiking fears that a crucial Iranian-controlled waterway could be disrupted.
The price of Brent crude oil spiked 5.7 per cent in the aftermath to $81.40 a barrel – marking a five month high.
Prices later gave up some gains to around a two per cent jump at around $79.
This came as President Donald Trump hailed the “monumental damage” the US had left on Iran’s Nuclear sites.
“Obliteration is an accurate term!” The President posted on his Truth Social platform.
Iran responded to the US attacks with a vow of “everlasting consequences”.
Banking titan Goldman Sachs has sounded the alarm on further potential spikes in oil prices as a result of the war.
The bank said Brent crude could hit $110 per barrel if oil flows through the Strait of Hormuz – a critical Iranian controlled sea passage that transports 20 million barrels of oil each day – were disrupted.
Should the critical water way have its supply halved and remain down by 10 per cent for the following 11 months, prices would average around $95 a barrel in the fourth quarter, Goldman said.
Prediction markets reflect a 52 per cent probability of Iran closing the Strait of Hormuz, Goldman said citing data from Polymarket.
Markets muted
Markets have so far remained subdued to the rising conflict in the Middle East.
Asian markets opened in the red but were able to claw back gains in later trading.
In afternoon trading in the region, the Nikkei was down nearly 0.2 per cent whilst the Shanghai had swung to a gain of over 0.5 per cent.
Since June 12, when Israel first attacked Iran, the FTSE 100 and New York’s blue-chip S&P 500 have nudged down just over one per cent each. Comparatively, each index fell over five per cent in the month following February 11 as conflict intensified in the Russia and Ukraine war.
FTSE 100 futures indicate London’s flagship stock market will open on 0.3 per cent dip on Monday.
Richard Hunter, Head of Markets at interactive investor, said: “There is tension but not trauma as investors monitor developments in the Middle East.”
Hunter said: “In turn, oil took another leg higher on supply concerns, although the gains were tempered by suggestions that OPEC is well placed to turn on the supply taps should the need arise.
“The next turn of events will inevitably dictate investor sentiment, with traders currently braced for retaliatory Iranian action, as well as keeping a close eye on the Strait of Hormuz, where a disruption of oil flows could follow.”