Goldman Sachs Says Oil Could Hit $120 as Trump Spurns Iran Nuclear Negotiations

Goldman Sachs has warned that oil prices could surge to $120 per barrel if shipping attacks in the Middle East intensify, as the Trump administration’s shift from diplomatic engagement with Iran toward military action and sanctions reshapes global energy markets. With Brent crude already near $97 and global oil inventories depleted by more than 400 million barrels, the market faces heightened vulnerability to supply disruptions.

• Brent crude trading near $97 per barrel on Monday, approaching levels unseen since late July.
• Goldman Sachs warns oil could reach $120 per barrel if shipping attacks expand and become more severe.
• Global oil inventories outside China have fallen more than 400 million barrels since conflict escalated.

• $97/bbl Brent crude price on Monday, recovery from earlier lows
• $120/bbl Goldman Sachs price target if shipping attacks broaden and intensify
• 400M bbl Global inventory decline outside China since conflict began
• $100+ Diesel premium above crude prices in the United States

Oil prices are climbing sharply as geopolitical tensions intensify in the Middle East following the Trump administration’s rejection of diplomatic engagement with Iran in favor of military strikes and comprehensive economic sanctions. Brent crude was trading near $97 a barrel on Monday, reflecting growing concerns about regional stability and potential disruptions to energy supplies. The policy shift marks a departure from multilateral negotiations and represents escalation in US-Iran confrontation that is sending ripples through global energy markets.

The Middle East remains one of the world’s most strategically important energy regions, with roughly 30 percent of globally traded oil passing through the Strait of Hormuz annually. Any sustained disruption to shipping in this corridor poses immediate risks to energy security worldwide, affecting everything from manufacturing costs to consumer fuel prices. The current escalation threatens this critical infrastructure at a moment when global crude markets are already functioning with minimal spare capacity and reduced inventory buffers.

Goldman Sachs flags $120 Oil if shipping attacks intensify

Goldman Sachs warned that prices could reach $120 per barrel if shipping attacks expand and become more severe, signaling potential for further increases should tensions continue to escalate. Daan Struyven, the bank’s co-head of global commodities research, identified the $120 level as possible under such conditions. The warning is not new: Goldman initially flagged this price target in July, months before the current escalation, suggesting that structural concerns about supply disruption remain deeply embedded in the bank’s analysis.

Commodity funds are adopting bullish positions as global inventories approach critical levels, adding volatility to energy markets and Wall Street trading. The market pressure is already visible in refined products, with diesel prices climbing to record highs and trading more than $100 per barrel above crude in the United States, reflecting specific concerns about refining capacity and the global supply chain. These elevated diesel premiums indicate that markets are pricing in significant disruption risk to refining operations and fuel distribution networks.

Historically, oil price spikes above $100 per barrel have created significant economic headwinds, affecting transportation costs, airline operations, and broader inflation dynamics. If prices approached Goldman’s $120 target, the impact would ripple across global supply chains that have already been stressed by years of geopolitical uncertainty and climate-related disruptions. Consumer energy bills, shipping costs for goods, and inflation trajectories would all face upward pressure in such a scenario.

US military action and Iranian economic pressure reshape regional dynamics

The Trump administration has replaced negotiations with Iran through military strikes, sanctions, and a comprehensive blockade preventing Iranian imports and exports. Weekend US military strikes targeted three Iranian tankers, and a Monday attack damaged Saudi Aramco facilities in Jizan, demonstrating that the conflict now involves direct military action affecting regional energy infrastructure rather than remaining theoretical. These direct strikes on energy assets represent a significant escalation from previous phases of confrontation.

This more confrontational stance has created significant economic pressure on the Iranian economy and strained the country’s population. Iran’s Supreme Leader has reportedly remained in hiding for six months, underscoring the internal instability created by these geopolitical developments. In response, Mohsen Rezaei, who heads Iran’s Supreme National Security Council, indicated Sunday that the country is developing a new strategy to address the blockade, ongoing negotiations, and regional conflict.

Rezaei proposed establishing a new exclusion zone across the Persian Gulf and Gulf of Oman to expand Iran’s restrictions beyond the Strait of Hormuz, a move that would fundamentally alter maritime shipping dynamics in one of the world’s most critical energy chokepoints. Such a strategy would represent a significant shift from Iran’s previous tactics and would directly threaten global oil markets.

Inventory depletion and the risk of miscalculation

Energy Aspects, an oil market research firm, reports that global oil inventories outside China have declined sharply, falling more than 400 million barrels since the conflict began. This inventory depletion is significant because it reduces the market’s buffer against supply shocks, making prices more volatile and vulnerable to sudden disruptions. The tightened inventory situation has raised the stakes for any further disruption to shipping or production in the region.

Reduced inventory levels mean that markets have less flexibility to absorb unexpected supply losses. In past energy crises, strategic petroleum reserves and commercial inventory provided cushions that allowed markets to stabilize. With inventories now depleted, even temporary shipping interruptions could trigger substantial price increases without sufficient supply to offset losses.

Hamidreza Azizi, an Iran analyst at the International Crisis Group, suggested that Tehran likely seeks calibrated escalation rather than all-out war, with tactics potentially including pressure on shipping routes, US military installations, or energy infrastructure without triggering a full military response. Azizi warned that miscalculation, not intent, is now the biggest risk of a wider conflict, capturing the fundamental challenge facing both parties: managing a dangerous situation where intentions may be relatively restrained, but the potential for accidental escalation remains substantial in an increasingly militarized environment.

The risk of unintended consequences is heightened when military and civilian infrastructure become intertwined, particularly in the energy sector where targets serving economic functions also carry strategic significance. A miscalculation by either side could quickly spiral beyond initial intentions, affecting oil markets and energy supplies before diplomatic channels could restore stability.

Iran and Oman are negotiating a temporary shipping route, reviving earlier talks about a Hormuz corridor that briefly eased oil prices last month, though whether the United States will accept such an arrangement remains uncertain, adding to market unpredictability as traders await clarity on whether de-escalation pathways remain viable. Any successful negotiation creating alternative shipping corridors could meaningfully reduce market risk and potentially ease pressure on prices, but such diplomatic breakthroughs face significant political obstacles.

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