Goldman Sachs has warned that worsening attacks in the Persian Gulf and Red Sea could push global oil prices above $120 per barrel, adding further pressure to fuel costs that have already surged during the Iran war.
The investment bank’s forecast represents a potential increase of roughly 20% from current Brent crude prices, which are trading near $100 per barrel. Oil markets have climbed sharply in recent weeks as conflict in the Middle East intensifies, including U.S. strikes on Iranian oil tankers and attacks by Houthi rebels on Saudi energy facilities.
Brent crude briefly reached $99.46 per barrel on Tuesday before falling back to around $97.85. Prices have risen from approximately $72 per barrel two months ago as renewed fighting has reduced expectations of an agreement to reopen the Strait of Hormuz, a critical shipping route responsible for around one-fifth of global oil flows.
Geopolitical risks continue driving oil prices higher
Analysts at political risk consultancy Eurasia Group said oil markets remain heavily influenced by several ongoing conflicts, including the U.S.-Iran conflict in the Persian Gulf, tensions between Saudi Arabia and Houthi forces in Yemen, and the Russia-Ukraine war.
The firm also highlighted limited global refining capacity and continued demand for refined petroleum products as additional factors contributing to higher prices.
Higher fuel prices cost U.S. consumers billions
U.S. consumers have spent an additional $100 billion on fuel since the Iran war began on February 28, according to a tracker from Brown University.
Higher gasoline prices accounted for approximately $55 billion of the additional costs, while diesel accounted for about $45 billion.
Diesel prices, which affect transportation, agriculture, construction, and rail industries, reached a record $5.90 per gallon on Labor Day, according to AAA data.
The increase is affecting consumers directly through higher costs at gas stations and indirectly through rising transportation expenses for groceries and other goods. Economists expect inflation data to show consumer prices increased 3.3% annually in August, remaining above the Federal Reserve’s 2% target.
GasBuddy petroleum analyst Patrick De Haan noted that fuel prices typically decline after the summer driving season as demand falls and winter gasoline production begins, but recent increases in crude oil prices, particularly diesel costs, have reversed that trend.
Goldman Sachs maintains a more moderate base forecast
While Goldman Sachs warned that oil prices could rise above $120 per barrel under a severe escalation scenario, its main forecast remains more moderate.
The bank expects Brent crude to decline toward $85 per barrel by the end of the year, with West Texas Intermediate crude settling around $80 per barrel. These estimates are about $5 higher than Goldman’s previous forecast.
Goldman analysts said the forecast assumes continued shipping disruptions but noted that commercial fuel inventories in developed countries have remained relatively stable and that Middle Eastern oil exports could gradually recover.
The Trump administration has predicted that oil prices could eventually fall below pre-war levels once the conflict ends. Treasury Secretary Scott Bessent said increased global supply could eventually push prices toward $40 or $50 per barrel.
Goldman’s most optimistic scenario places Brent crude near $60 per barrel in 2027 if Persian Gulf oil production rises by 1 million barrels per day above pre-war levels.
Markets prepare for prolonged oil market uncertainty
Despite possible downside scenarios, Goldman Sachs said risks remain heavily tilted toward higher oil prices, particularly in the short term.
Options markets now indicate a 25% probability that Brent crude will remain above $100 per barrel by March 2027, compared with only 6% one month earlier.
Eurasia Group expects oil prices to remain between $85 and $105 per barrel, saying there is currently limited expectation for a resolution to the major conflicts affecting global energy markets.
