Goldman Sachs estimates a geopolitical premium of approximately $10 per barrel on Brent crude, though it suggests oil could exceed $90 if Iranian supply is disrupted.
The bank’s base-case scenario, which assumes no supply disruption and Brent averaging $60 per barrel, is becoming increasingly doubtful due to President Trump’s floating of the possibility of the United States joining Israel in bombing Iran.
Barclays warns that crude prices could surge above $100 per barrel if the Middle East conflict escalates, and Brent could reach $85 per barrel if half of Iran’s oil exports are disrupted.
Geopolitics could move Brent crude higher by around $10 per barrel, Goldman Sachs has estimated, from a starting point in the mid-$70s. However, the bank admitted oil could top $90 in case of Iranian supply disruption.
Goldman’s analysts pointed to the disruption of oil flows via the Bab el-Mandeb Strait by the Yemeni Houthis’ attacks on vessels as an example of the fragility of Middle Eastern oil export security.
Its base-case scenario, the bank said, remains the same, with Brent averaging $60 per barrel in the final quarter of the year in case of no supply disruption. This scenario, however, has in recent days become increasingly doubtful as President Trump floats the possibility of the United States joining Israel in bombing Iran.
“I may do it. I may not do it. I mean, nobody knows what I’m going to do,” Trump told media earlier this week, causing a reaction among Republican party supporters who’d rather the U.S. stayed away from that war.
“We can’t do this again,” Steven Bannon said at an event in Washington this week. “We’ll tear the country apart. We can’t have another Iraq.”
Trump has acknowledged the opposition, saying “I’m not looking to fight. But if it’s a choice between them fighting or having a nuclear weapon, you have to do what you have to do.”
Oil prices have retreated slightly, meanwhile, as traders await clarity on the U.S. position. At the time of writing, Brent crude was trading at $76.56 per barrel, and West Texas Intermediate was trading at $75.22 per barrel.
Barclays has warned that crude could surge above $100 per barrel if the war in the Middle East heats up. The bank also said that Brent could hit $85 per barrel if half of Iran’s oil exports gets disrupted. Iran exports over 2 million barrels of crude daily, almost exclusively to China.
By Irina Slav for Oilprice.com
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