Fears of a major oil supply shock are mounting as tensions escalate in the Strait of Hormuz, a vital artery for nearly 20% of global crude shipments, with Wall Street racing to assess the potential price impact after the U.S. struck Iran over the weekend.
What Happened: Goldman Sachs on Monday flagged a scenario where Brent oil could soar to $110 per barrel if Iran shuts down the Strait of Hormuz in retaliation for the American strikes on three of its nuclear sites.
Commodity analyst Daan Struyven said in a note that the geopolitical risk premium in oil prices — as broadly tracked by the United States Oil Fund (NYSE:USO) — could “jump to record levels” if the strait is blocked.
The mere risk of a closure has already added an estimated $12 geopolitical premium …