Oil prices could surge to $120 per barrel, warns Goldman Sachs

Goldman Sachs has issued a stark warning that oil prices could skyrocket to over $120 per barrel by the end of the year, driven by escalating conflict in the Middle East. The investment bank highlighted potential disruptions in the Strait of Hormuz as a key factor that could destabilize global energy markets.

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If the disruptions in the Strait of Hormuz continue, oil prices could reach these heights in the fourth quarter.

Brent crude oil prices have already surpassed $90 per barrel amid ongoing U.S.-Iran tensions. While Goldman Sachs' primary forecast anticipates a de-escalation leading to prices around $80, analysts acknowledge a growing upside risk. The bank noted that current refined product prices suggest room for crude oil prices to climb further.

Adding to the volatility, Houthi militants in Yemen have threatened a naval blockade of Saudi Arabia via the Bab al-Mandab strait. This critical chokepoint is vital for shipping between the Red Sea and the Gulf of Aden. Such a blockade could severely impact oil exports from Saudi Arabia's Red Sea ports, which have become an alternative route to bypass the Strait of Hormuz.

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A $90 per barrel oil price is still low compared to the prices of refined oil products. This means refineries will still have incentives to buy crude oil, and oil prices have room to rise further.

Energy experts emphasize that the viability of oil prices reaching $120 would depend on sustained high prices for refined products. The situation remains fluid, with the potential for further escalation in the Red Sea and Hormuz regions posing significant risks to global oil supply and prices.

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Even though the Houthis have not yet clarified how the blockade will be enforced, their previous campaign against commercial vessels shows they have both the ability and the will to disrupt shipping in the Red Sea.