Goldman Sachs: $110 Oil Possible if Hormuz Disrupted

Investment bank Goldman Sachs has delivered a stark warning, estimating that oil prices could skyrocket to $110 a barrel if flows through the critical Strait of Hormuz are halved for a month and then remain 10% lower for the subsequent eleven months. This projection underscores the severe economic consequences of a potential disruption in the waterway, a threat amplified by the Iranian parliament’s recent vote to consider closing it in retaliation for a US attack. The International Monetary Fund’s director, Kristalina Georgieva, has already cautioned that US strikes on Iran could inflict significant damage on global growth.
The Strait of Hormuz is a pivotal shipping channel, through which a fifth of the world’s oil consumption flows. A closure, even partial, would create an immediate oil supply shock, leading to surging energy prices, heightened inflation, and a likely deceleration of global economic growth. While oil prices initially jumped over 5% on Sunday following the Iranian threat, reaching a five-month high, they later eased back to just over $76 a barrel on Monday.
The gravity of the situation has prompted strong international reactions. US Secretary of State Marco Rubio has unequivocally stated that closing the strait would be “economic suicide” for Iran and has called upon China to exert its influence, highlighting Beijing’s substantial dependence on Hormuz for its oil imports. This emphasizes the widespread concern over the stability of the region’s energy infrastructure.
Adding to the complexity, analysts at RBC Capital Markets have warned against premature optimism, pointing to a “clear and present risk of energy attacks” that could originate from Iranian-backed militias in Iraq. The reported U-turn of two supertankers in the Strait of Hormuz over the weekend further illustrates the immediate impact of the heightened tensions on shipping, underscoring the ongoing volatility and the need for vigilance.