Goldman Sachs forecasts potential scenarios leading to increased oil prices. While there are currently no expectations of major disruptions in oil and natural gas supply, risks remain for supply issues and higher energy prices in the future.

One potential risk comes from the Polymarket prediction, suggesting a likely disruption in the Strait of Hormuz by Iran in 2025. If Iran’s supply decreased by 1.75 million barrels per day, Brent crude oil could peak at around $90 per barrel. Further disruptions, with oil flows through the Strait dropping by 50% for one month and then staying down 10% for another eleven months, could cause Brent to briefly rise to $110.

Impacts On European Natural Gas Markets

The report also indicates that European natural gas (TTF) and LNG markets may react to a higher chance of significant supply disruptions, with TTF potentially increasing to 74 EUR/MWh or $25/MMBtu.

Goldman’s report lays out a set of market contingencies if oil supply faces disruptions, particularly from geopolitical tensions in the Middle East. While supplies are presently stable and production continues largely uninterrupted, there is little room for comfort given the fragile balance between demand and geopolitical risk. A key concern comes from an inference drawn via Polymarket’s activity, implying that Iran may interfere with navigation through the Strait of Hormuz in 2025.

To decode the reference: this narrow passage is vital, accounting for a considerable share of global oil exports. A sharp fall-off in Iranian exports alone — to the tune of 1.75 million barrels per day — would push benchmark Brent crude close to $90 per barrel. This isn’t conjecture—it’s derived from past pricing reactions to similar flows being constrained. Even more concerning would be a scenario where half the Strait’s exports were stopped for a month, followed by a 10% decrease sustained over nearly a year. In such a case, the short-term move could send crude soaring to $110.

Natural gas is threaded through the analysis too. The European TTF benchmark isn’t spared; disruptions affecting LNG flows could drive TTF towards €74 per megawatt hour, translating to about $25 per million BTU. European dependence on LNG is far higher now, following a pivot away from Russian pipeline volumes. That leaves pricing more sensitive to shipping bottlenecks and logistical hiccups, even if demand remains steady.

Strategic Adjustments And Monitoring

So, what do we take from all of this? For short-term trading strategies based on price derivatives, we may need to account for potential volatility clusters tightly tied to geopolitical events rather than fundamentals alone. In particular, options pricing is likely to rise with any flare-up in rhetoric or regional escalation suggesting real risk to passage through the Strait. That volatility skew, which had been receding, may widen again.

Gas-linked contracts will require precise monitoring of global LNG movements and floating storage levels. If indicators show congestion at LNG terminals or delays in tanker transit times, that might tip balances quickly. Watch for any weather-related interference in key zones like the Suez or Panama Canals. Traders should already be adjusting exposure, particularly with summer cooling demand due soon and risk priced into later-month contracts.

Shorter tenor positions might favour range-bound activity unless catalysts start to materialise earlier than expected. Political developments and credible shipping alerts deserve attention throughout. The market is currently priced for stability, but there’s a defined range in which that assumption might break. Volatility hasn’t disappeared — it’s just been repriced.

In the meantime, spreads between crude benchmarks or even different LNG hubs could present opportunity. Cross-market positioning may become more attractive if Brent and WTI behave differently in the face of shipping risk that hits one area harder than another. Similarly, keeping an eye on gas contracts in Asia could serve as a cross-reference if demand starts to pull cargoes eastward, tightening balance in Europe before autumn arrives.

Above all, keeping exposures nimble in the face of asymmetric risk scenarios is, now more than ever, not an option — it’s likely to make or break performance.

Create your live VT Markets account and start trading now.