Goldman Sachs has warned of the risk that oil prices could soar to $120. What is its advice?

Oil prices could rise to $120 per barrel if attacks on ships in the Middle East intensify, according to Goldman Sachs analysts quoted by Bloomberg. This target implies a rise of about a quarter from current Brent crude prices.

"The events of the past few days do indeed indicate that the risk of disruptions to shipping spreading and intensifying is quite significant," said Daan Streven, co-head of global commodities research at Goldman, in an interview with Bloomberg. Over the weekend, the U.S. struck three Iranian tankers in response to an attack on two of its warships. At the same time, Tehran announced the creation of a new exclusion zone outside the waterway. Meanwhile, U.S. naval forces continue to block the Islamic Republic’s ports, while escorting vessels from other oil-producing countries as they leave the region, Bloomberg reports.

In addition to the scenario of oil at $120 per barrel, the bank is also considering a lower target of $80 in the event that exports from the region return to normal, Straven noted. Brent crude oil futures rose by about 1.6% during trading on Monday, September 7, to $97.8 per barrel.

The escalation of the crisis in the Strait of Hormuz—following more than half a year of war—has driven up prices across a wide range of energy commodities; meanwhile, the rate of price increases for natural gas and petroleum products is outpacing that of crude oil, according to Bloomberg. The price of industrial diesel fuel has more than doubled since the beginning of the year.

“Although we see significant upside potential for crude oil prices, we recommend that investors hedge against geopolitical risks by taking long positions (anticipating an increase. — Oninvest) in natural gas and petroleum products,” said Straven. “Supply shocks are more significant here than in the crude oil market.”

China is expected to continue curbing overheating in the oil market: in response to rising oil prices, the country is simply cutting back on its purchases. However, in the natural gas and refined products markets, Beijing no longer acts as such a balancing factor, the analyst emphasized.

This article was AI-translated and verified by a human editor