Goldman Sachs says crude could spike by $20 on Iran oil shock

Oil prices could shoot up $20 per barrel if Iranian production sees a hit, according to Goldman Sachs, Report informs via CNBC.

US crude futures rose around 5% on October 3 and ticked higher again October 4 morning on concerns that Israel could strike Iran’s oil industry in retaliation for Tehran’s missile attack this week.

It is estimated that “if you were to see a sustained 1 million barrels per day drop in Iranian production, then you would see a peak boost to oil prices next year of around $20 per barrel,” Daan Struyven, Goldman Sachs’ co-head of global commodities research, told CNBC’s “Squawk Box Asia” on October 4.

This is under the assumption that oil cartel OPEC+ refrains from responding by increasing production, Struyven said.

Should key OPEC+ members such as Saudi Arabia and UAE offset some of the production losses, oil markets could see a smaller boost of slightly less than $10 barrel, he added.

Since the Israel-Hamas armed conflict began on October 7 of last year, there had been limited disruptions to the oil market, with prices remaining under pressure due to increased production from the US and sluggish demand from China.

However, the sentiment could be shifting this week. US crude oil prices just saw a third consecutive session of gains after Iran launched a ballistic missile attack on Israel, heightening tensions in the region. In recent days, industry watchers have sounded the alarm, warning of a real threat to supply.

Iran, which is a member of OPEC, is a key player in the global oil market. It produces almost four million barrels of oil per day, and an estimated 4% of the world’s supply could be at risk if Iran’s oil infrastructure becomes a target for Israel as the latter considers a countermove.

Saul Kavonic, senior energy analyst at MST Marquee, raised the potential of Iran’s Kharg Island, which is responsible for 90% of the country’s crude exports, becoming a target.

“The bigger concern is this is the kind of a much more imminent beginning of a wider conflagration of the conflict which could impact transit through the Strait of Hormuz,” he added.

If Israel hits Iran’s oil industry, supply disruptions in the Strait of Hormuz could become of concern, other analysts echoed.

Iran has previously threatened to disrupt flows through the Strait of Hormuz if its oil sector is impacted.