Goldman Sees Brent Crude Rising Above $120 in Worst-Case Hormuz Scenario

Goldman Sachs said Brent crude could climb above $120 a barrel if disruptions to oil shipments through the Strait of Hormuz persist, outlining a worst-case scenario for the market. In its base case, the bank expects Brent to hold at $80 in the fourth quarter if Middle East tensions ease.

Bloomberg reported on July 20 that Goldman, in a note, projected Brent could top $120 a barrel in the fourth quarter of this year if oil flows through the Strait of Hormuz remain below 45% of prewar levels.

Goldman said oil prices are coming under upward pressure again as military clashes between the US and Iran intensify and crude shipments through the Persian Gulf fall sharply.

The bank's base-case scenario is more moderate. It projects Brent will average $80 a barrel in the fourth quarter and $75 next year, assuming tensions in the Middle East gradually ease. Even so, Goldman said risks to the price outlook are tilted to the upside because shipping disruptions could hit not only the Strait of Hormuz but also the Red Sea.

Oil prices have already surged this month after fighting between the US and Iran resumed and Yemen's Houthi rebels threatened to block Saudi oil shipments. Brent recently traded above $91 a barrel. In late April, during the early stages of the war, it rose above $126.

Goldman added that slower Chinese crude imports and greater elasticity in global demand could partly limit gains caused by a supply shock.

The bank also said the diesel market is more vulnerable to supply disruptions than the crude market. Diesel inventories were already tight before the war, and shortages could deepen if strikes on Russian refining facilities coincide with hurricanes, extreme heat and refinery maintenance delays. As a hedge against geopolitical risk, Goldman recommended a trade betting on a short-term rise in European diesel prices.

Park Su-bin, Hankyung.com reporter waterbean@hankyung.com