After the U.S. crackdown, how will international oil prices move? Goldman Sachs has outlined four possible scenarios

Goldman Sachs' trading team warns that the escalation of geopolitical conflicts between the U.S. and Iran could have a significant impact on international oil prices. In the most extreme case, international oil prices could soar to the range of $120-150 per barrel, triggering a chain reaction in the stock and foreign exchange markets.

According to reports from CCTV News and Global Network, on June 21 local time, U.S. President Trump stated on his social media platform "Truth Social" that the U.S. had completed attacks on three Iranian nuclear facilities in Fordow, Natanz, and Isfahan, and claimed that "Iran's Fordow (nuclear facility) no longer exists." Following the attack, an advisor to Iran's Supreme Leader Khamenei called for missile strikes on U.S. naval vessels and the blockade of the critical oil transport route, the Strait of Hormuz.

The Iranian government's threat to block the Strait of Hormuz has prompted Goldman Sachs' commodity research team to reassess risk scenarios.

Daan Struyven, co-head of Goldman Sachs' commodity research, stated that current oil prices already include a geopolitical risk premium of about $10 per barrel, and the market is preparing for a significant rise in oil prices in the coming months:

Based on the implied volatility term structure, changes in the oil futures curve, and the skew of call options, we assess that the oil market believes there is a high probability of a significant rise in oil prices in the coming months, but the market has not significantly changed its long-term expectations.

According to our estimates, the current TTF natural gas price has factored in a 10-15% probability of a large-scale supply disruption (e.g., blockade of the Strait of Hormuz).

Struyven warned that if energy flows remain uninterrupted, the risk premium for oil and European natural gas prices will decrease, but attention should be focused on two types of disruption scenarios:

Scenario of only Iranian oil supply disruption:

Brent crude oil prices could peak slightly above $90 per barrel, with the duration depending on whether Iranian supply is restored and whether OPEC+ core oil-producing countries exceed expectations in increasing production.

Broader disruption scenario:

Regional oil production or shipping, including the Strait of Hormuz, could be negatively impacted.

Nearly one-fifth of global oil production and one-fifth of liquefied natural gas (LNG) supply pass through this strait; and energy supply and demand are extremely price inelastic, especially since remaining oil production capacity is concentrated in the Gulf region. Oil prices could potentially exceed $100 per barrel. In the highly unlikely scenario of a long-term disruption, oil prices could temporarily double to balance the market.

TTF natural gas prices could rise to €75 per megawatt-hour, nearly doubling from current levels, and if disruptions persist, prices could be even higher.

Oil Price Forecasts Under Four Escalation Scenarios

Jerome Dortmans, co-head of Goldman Sachs' global oil and products trading team, has constructed four potential conflict escalation scenarios.

Scenario 1: No substantial or any supply losses occur in the current situation.

In the baseline scenario, if geopolitical tensions remain unchanged but there are no substantial supply disruptions, Brent crude oil will maintain a risk premium of $5-7, trading around $72 per barrel Scenario 2: Israel attacks Iranian economic assets related to the oil market, such as refineries or oil export terminals.

Jerome Dortmans believes that this situation is difficult to occur in isolation and expects it to provoke Iranian retaliation against the Gulf region, pushing oil prices to the range of $80-90 per barrel.

Scenario 3: Iran retaliates by attacking regional assets, whether U.S. military assets or oil assets of Gulf neighbors.

In this case, commercial vessels may refuse to pass through the strait, with only sovereign vessels from Gulf countries continuing to operate, oil prices will "clearly rise towards $100."

Scenario 4: Iran closes the Strait of Hormuz through methods such as laying mines, issuing threats of attack, or actual attacks.

Jerome Dortmans states that this will affect the daily supply of 15-17 million barrels of crude oil, "the oil market clearly cannot cope with this situation," prices will rise to the range of $120-150, similar to the price behavior at the beginning of the Russia-Ukraine conflict.

Cross-Asset Market Chain Reaction Forecast

Goldman Sachs foreign exchange options trader Simon Costello points out that since the escalation of geopolitical tensions, the overall strengthening of the U.S. dollar has become the dominant trend . Peripheral currencies such as the Australian dollar and Canadian dollar face significant correction pressure due to speculative funds previously taking large long positions.

In the stock market, Goldman Sachs U.S. equity index trading head Shawn Tuteja expects that a rapid rise in oil prices to $100 will pose a negative shock to risk assets.

Considering that the current net positions have reached the 75th percentile level of multi-year backtesting, and total risk exposure is at a high level, the S&P 500 index may face a decline of 200-300 points, with AI-related stocks being the most affected due to the highest concentration of holdings.

The response in the interest rate market is relatively complex.

Goldman Sachs short-term macro trader Brian Bingham believes that although soaring oil prices will increase inflation concerns, the Federal Reserve has indicated a willingness to overlook one-time price level changes, and the recent positive response to weakness in the labor market may offset some of the impact. In Europe, Goldman Sachs expects the European Central Bank may pause interest rate cuts in September, and the Bank of England's quarterly rate cut pace may be impacted.