Goldman Sachs: Oil could hit $120 amid U.S.-Iran standoff

Goldman Sachs said oil prices could reach $120 a barrel if attacks on shipping and energy infrastructure broaden and intensify. Daan Struyven, co-head of Goldman’s global commodities research, flagged the $120 level on Monday as Brent crude climbed toward about $98 a barrel, its highest point since late July.

The bank tied the risk of higher prices to recent regional incidents. U.S. forces struck three Iranian tankers over the weekend, and a separate attack hit a Saudi Aramco facility in Jizan on Monday. Those events have reduced market confidence in supply stability and pushed traders to reprice risk.

An industry research firm reported that oil inventories outside China have fallen by more than 400 million barrels since the start of the conflict. Commodity funds have turned net long as reserves approach what some analysts call a tipping point, adding upward pressure to prices.

Iran’s security leadership has discussed new measures in response to the trade blockade. Mohsen Rezaei, head of Iran’s Supreme National Security Council, proposed creating an exclusion zone across the Persian Gulf and the Gulf of Oman, extending restrictions beyond the Strait of Hormuz. Iran and Oman are also reported to be negotiating a temporary shipping route that would revive a Hormuz corridor arrangement seen earlier; U.S. approval of any such route remains unclear.

Market strain is evident beyond crude. Diesel in the United States is trading at record spreads, more than $100 a barrel above crude, reflecting pressure on fuel supplies and refining capacity. Traders say large crack spreads point to tight supplies of middle distillates and can signal deeper pressure if disruptions continue.

Hamidreza Azizi, an Iran analyst at the International Crisis Group, warned that Tehran appears to prefer calibrated escalation rather than an all-out war, which could include pressure on commercial shipping, regional military bases or energy sites. “Miscalculation, not intent, is now the biggest risk of a wider war,” he said.

Goldman noted that the $120 projection was first raised in July before the most recent price moves. The bank and market participants say the combination of falling inventories, active attacks on shipping and energy targets, and heightened geopolitical risk is contributing to a volatile environment that could push prices higher if disruptions persist.