Goldman Sachs has issued a stark warning: oil prices could rally to $120 a barrel if attacks on shipping in the Middle East intensify, disrupting crucial supply routes through the Strait of Hormuz. The warning, which has rippled through financial markets and caught the attention of investment advisors, underscores how geopolitical tensions are now the dominant force driving energy prices.

The $120 Scenario

In a research note widely covered by Bloomberg, The Wall Street Journal, and OilPrice.com, Goldman’s co-head of global commodities research, Samantha Dart, said that a significant escalation in ship attacks could push Brent crude to $120. The scenario is not a base case, but a clearly articulated risk that hinges on further disruption to the world’s most important oil chokepoint.

“Gasoline and diesel prices can remain elevated into the whole of next year as tightness in refining capacity is not being resolved,” Dart said on Bloomberg Surveillance, explaining why even a temporary supply shock could have lasting effects on consumers.

Goldman’s analysis points to a confluence of factors: not just the immediate threat to tankers, but also a global refining system that is already stretched to its limits. Even if crude flows are maintained, the inability to process it into fuels means that any additional disruption disproportionately impacts pump prices.

Strait of Hormuz: A Chokepoint Under Siege

According to a separate report cited by en.portnews.ru, traffic through the Strait of Hormuz has plunged by as much as 90% in recent weeks, a figure attributed to Rystad Energy, a leading independent energy research firm. The strait handles roughly 20% of global oil consumption and a third of the world’s LNG trade. Such a dramatic drop would represent one of the most severe supply disruptions in decades.

While Goldman’s own models may use different traffic assumptions, the consensus is clear: the shipping industry is re-routing tankers away from the region, insurers are hiking war-risk premiums, and several major carriers have suspended transits. This is not a drill; it is a real-time stress test for global energy security.

What’s Driving the Attacks?

Over the past few weeks, Iranian-backed Houthi rebels have launched multiple drone and missile strikes on commercial vessels in the Red Sea and the Arabian Sea, according to international news reports. Although the attacks have been centered near Yemen, the spillover effect has reached the Strait of Hormuz, which separates Iran from the Arabian Peninsula.

In response, the U.S. and its allies have launched Operation Prosperity Guardian, a naval coalition to protect shipping lanes. Yet the mere threat of attacks has caused many shipowners to avoid the region entirely, rerouting around Africa’s Cape of Good Hope—adding weeks to transit times and millions in fuel costs.

Refining Capacity: The Hidden Bottleneck

Goldman’s warning is not just about crude supply. Samanta Dart emphasized that even if crude tankers eventually get through, the world’s refineries are running near maximum capacity. After years of underinvestment and pandemic-era shutdowns, many older refineries have closed permanently. The result is a system that cannot absorb shocks.

• U.S. gasoline inventories have fallen to seasonal lows.
• European diesel prices have spiked above $100 a barrel.
• Asian refiners are competing for spot cargoes of alternative grades.

Dart expects this tightness to persist “through the whole of next year,” meaning that consumers should brace for elevated fuel costs even if the geopolitical situation calms down.

Market Reaction and Advisor Alerts

Financial markets have taken notice. InvestmentNews reported that Goldman’s $120 scenario has put advisor portfolios on high alert, especially for clients with significant exposure to energy equities, airline stocks, or inflation-sensitive assets. Oil prices have already climbed by nearly 15% since the start of the latest attacks, and a move to $120 would represent a further 20% gain from current levels.

“This is a geopolitical risk that advisors cannot ignore,” says one portfolio manager quoted by InvestmentNews. “Energy hedging is back on the table, but clients need to be cautious about timing.”

The Wall Street Journal framed the warning within the broader context of rising tensions in the Middle East, noting that President Biden’s administration has faced pressure to ease sanctions on Iran as part of a broader diplomatic push. However, the current trajectory suggests that the conflict may escalate.

Framing from Different Outlets

Each outlet has emphasized a different angle:

• Bloomberg Markets focused on the refining capacity issue, quoting Dart’s commentary from a TV interview.
• InvestmentNews stressed the implications for financial advisors and portfolio construction.
• OilPrice.com highlighted the shipping risk premium and its effect on tanker rates.
• PortNews brought in Rystad’s data on the 90% plunge in Hormuz traffic, making the story more visceral.

Despite these different frames, there is unanimity on the core message: the oil market is one major incident away from a price spike that would echo the 1970s oil shocks.

Historical Context and Implications

The last time oil traded at $120 was in 2012, during a period of sanctions against Iran. In 2008, prices hit $147, contributing to the global financial crisis. A return to such levels today would threaten central banks’ efforts to tame inflation, potentially forcing them to keep interest rates higher for longer.

For the global economy, the timing could not be worse. Major central banks are still grappling with above-target inflation, and the IMF has repeatedly warned that energy price shocks are the biggest threat to a soft landing.

Goldman’s experts note that the $120 scenario is not their base case. Their current forecast for Brent remains around $90 for next year. However, they argue that the asymmetric risk is clearly skewed to the upside. If there is a single event—such as a direct strike on a major LNG tanker or a closure of the Strait of Hormuz entirely—the price surge could be even greater.

In the meantime, the world watches the waters of the Middle East with bated breath, knowing that every attack on a commercial vessel brings the market one step closer to the dreaded $120 figure.