Goldman Sachs says oil could top $100 on Hormuz crisis
Goldman Sachs warns oil prices could top $100 if Hormuz flows remain stalled. The bank notes daily flows are down 90% amid rising regional tensions.
The Goldman Sachs Group, Inc. has warned that oil prices are likely to surpass $100 per barrel next week if there are no signs of recovery in the flow of energy exports through the Strait of Hormuz. The financial institution noted that upside risks to its base-case projections are increasing rapidly as the disruption persists.
The bank indicated it may soon revise its current price forecast if the assumption of a gradual normalization in the region is not supported by data in the coming days. Currently, the base-case forecast for Brent Crude Oil is set in the $80s for March and the high $70s for the second quarter.
We now also think its likely that oil prices, especially for refined products, would exceed the 2008 and 2022 peaks, if Strait of Hormuz flows were to remain depressed throughout March.
Market data suggests that average daily flows through the Strait of Hormuz have dropped by 90%. This significant reduction has led crude oil to its strongest weekly performance since the extreme volatility seen during the spring of 2020. The situation is exacerbated by heightened tensions involving Iran, where officials have challenged the United States to deploy naval vessels to escort tankers through the contested waters.
The diplomatic environment has deteriorated following demands from the American presidency for an unconditional surrender from Tehran. This escalation occurs one week into a conflict launched alongside Israel, complicating potential negotiations for a swift end to the hostilities. Meanwhile, Barclays PLC has suggested that Brent prices could potentially test $120 per barrel if the conflict in the Middle East continues for several more weeks.
