Oil Nears $100 as Middle East Conflict Erupts, Goldman Sees $120 Risk

Oil prices pushed dangerously close to $100 per barrel on Tuesday as renewed hostilities across the Middle East intensified fears of another major supply shock. Brent crude approached the psychologically important threshold for the first time in two months, injecting fresh anxiety into energy and financial markets.

Brent futures climbed about 2.3% to nearly $98.50 per barrel after briefly moving above $99 earlier in the session. West Texas Intermediate futures advanced 2.7% to roughly $94 per barrel as traders rapidly added geopolitical risk premiums.

The immediate pressure followed reports that Saudi Arabia had halted operations at energy facilities across its southern region. The decision came after attacks claimed by the Houthi militant group, which has also been obstructing Saudi oil shipments through the Red Sea.

Those disruptions are unfolding as the United States and Iran return to more forceful military exchanges following a relatively quieter period. The renewed confrontation has sharpened concerns that regional violence could damage production assets, disrupt tanker traffic, or further restrict access to crucial waterways.

The United States struck three crude tankers belonging to the Iranian government on Saturday after the Islamic Revolutionary Guard Corps fired ballistic missiles toward two United States Navy warships. United States Central Command said two tankers were “permanently disabled,” while the third vessel was completely destroyed and no American personnel were injured.

The war has now entered its sixth month, leaving the oil market exposed to recurring military shocks and persistent uncertainty. Combined with a global supply deficit, the latest escalation prompted Goldman Sachs to increase its forecasts for Brent and West Texas Intermediate prices.

The bank now expects Brent to trade at $85 per barrel in December, while West Texas Intermediate is projected at $80. Both estimates are $5 above its previous forecasts, with Goldman anticipating respective prices of $80 and $75 during 2027.

Despite repeated disruptions around the Strait of Hormuz, oil prices have remained below levels that many traders expected during a major regional war. Goldman said one explanation is that commercial petroleum inventories held by private companies in OECD nations have experienced relatively modest withdrawals.

Instead, much of the supply cushion has come from government strategic reserves, crude already loaded aboard tankers when the conflict began, and inventories stored in China. Chinese crude imports have fallen to approximately 60% of their level a year earlier, according to Goldman.

That temporary protection may prove fragile if the structural supply problems remain unresolved. Persian Gulf output has recovered to about two thirds of its prewar level as Gulf Cooperation Council producers use pipelines and alternative routes that reduce their dependence on Hormuz.

Goldman warned that Brent could reach $120 per barrel if Gulf supplies remain severely disrupted. The strategists identified intensified attacks against vessels in the Strait of Hormuz and Red Sea as “the most likely trigger of price upside,” placing tanker security at the center of the market outlook.

Iran said Monday that it was close to reaching an agreement with Oman for a temporary safe shipping corridor through the Strait of Hormuz. Before the conflict, the waterway handled about 20% of global oil volumes, making even limited interference a powerful threat to prices and physical availability.

The proposed arrangement reportedly does not include the United States, which maintains that Iran must not gain permanent control over the strait. That exclusion leaves considerable uncertainty around enforcement, security guarantees, insurance costs, and whether commercial operators would trust the corridor.

Washington has continued trying to push prices lower even as crude moves in the opposite direction. National gasoline prices averaged $4.15 per gallon on Tuesday, according to AAA, compared with $4.02 one month earlier, adding political pressure as consumers absorb higher fuel costs.

The Treasury Department, led by Secretary Scott Bessent, has launched “Operation Economic Onslaught” to target overseas financing connected to Iran. However, Washington has stopped short of taking major action against China, which remains the leading buyer of Iranian crude and a vital source of revenue for Tehran.

Jorge León, head of geopolitical analysis at Rystad Energy, argued that the fundamental picture has not shifted as dramatically as the price movement suggests. “I don't think things have materially changed compared to two weeks ago,” León said, adding that neither Washington nor Tehran appears committed to uncontrolled escalation.

“If they wanted to hit hard on each other, they could have done it, but they have not,” León said. “We've seen this volatile environment [of alternating strikes and diplomacy] … and I think the market is taking into account those recent events.”

That uneasy restraint is keeping the market suspended between diplomacy and a potentially severe supply crisis. With Brent already pressing toward $100, another attack on tankers, ports, pipelines, or strategic waterways could rapidly transform Goldman's $120 scenario from a warning into a live market threat.