Brent crude is currently trading below $98 a barrel, but a rise to $120 is no longer out of the question if the shock caused by the Iran war in the oil market intensifies.
Ziad Daoud, senior emerging markets economist at Bloomberg Economics, believes that reaching this level requires the convergence of three key developments: a broader military escalation, the closure of the Strait of Hormuz that would halt a larger portion of oil flows, and the disruption of alternative export routes that currently carry some of the shipments diverted from the strait.
This reading aligns with Goldman Sachs' bullish scenario, which sees Brent crude potentially surpassing $120 if shipping disruptions widen and Gulf exports remain significantly below pre-war levels. Meanwhile, Rachel Ziemba's comments to Bloomberg Television add another dimension, relating to the market's ability to absorb the shock through inventories, demand, and alternative supplies.
First condition: A broader military escalation
Daoud believes that a geopolitical escalation is already underway, with Iran and the United States exchanging attacks on tankers, and Washington tightening its blockade, while Tehran tries to break it and reassert its influence over shipping through the Strait of Hormuz, which represents one of its main bargaining chips.
According to his analysis, the conflicting goals of Washington and Tehran could turn economic pressure into a wider military confrontation, increasing the risk of disruption to shipping and supplies.
This is consistent with what Dan Stroeven, co-head of global commodities research at Goldman Sachs, told Bloomberg Television, noting that the events of recent days show that the risk of shipping disruptions widening and intensifying has become a significant factor.
The bank sees a scenario in which Brent crude reaches $120 if attacks on shipping in the Middle East expand and intensify, compared to a scenario of $80 if the region's exports return to normal.
The $120 level does not represent the bank's baseline forecast. Goldman Sachs raised its Brent crude forecast to $85 a barrel in December 2026 and to an average of $80 during 2027, assuming shipping disruptions continue into next year.
The second condition: The disruption of the Strait of Hormuz turns into an actual halt in flows.
The second condition in Dawood's analysis is the closure of the Strait of Hormuz, but current data reveals an important discrepancy between the observed ship movements and the volume of oil that is still reaching the market.
According to Dawood, the number of ships that can be tracked suggests that the strait is almost closed, while the actual oil flows paint a different picture, as millions of barrels still pass through it, including shipments that move without appearing in tracking data.
Market data estimates that around 7 to 8 million barrels per day of crude oil and refined fuels are still passing through or leaving the waters of the Arabian Gulf, compared to around 20 million barrels per day that were crossing the Strait of Hormuz before the war.
Kepler data also showed that the number of cargo ships passing through the Strait of Hormuz fell to seven on Monday from eight the previous day. However, some ships switch off their transponders, meaning that vessel traffic statistics do not provide a complete picture of flows.
This is where the importance of distinguishing between a seemingly closed strait and an actual halt in oil supplies becomes clear. For the $120 scenario to become more likely, the volume of barrels reaching the market would need to decrease significantly and for a longer period.
In contrast, Iran said that an agreement with Oman to establish a temporary safe passage through Hormuz had reached its final stages, opening the possibility of increased shipping traffic if the agreement succeeds, versus the risk of continued or expanded restrictions if tensions escalate again.
Third condition: Disruption of alternative export routes
Even with the disruption to Hormuz, the region's exports have not stopped completely, as other routes carry some of the oil that no longer passes through the strait.
Dawood identifies four alternative routes that currently play this role: the Saudi East-West pipeline, the port of Fujairah in the UAE, Omani ports, and the Iraq-Türkiye pipeline.
But these same routes are under pressure. According to Dawood's analysis, Houthi attacks have targeted Saudi exports on the Red Sea, while Iran is threatening to extend its restrictions beyond the Strait of Hormuz.
The importance of this lies in the fact that alternative routes represent one of the market's mechanisms for mitigating the impact of disruptions to the Strait. If these routes are also disrupted, it becomes more difficult to redirect the barrels, and the amount of oil unable to reach buyers increases.
Market's ability to absorb shock
Even if all three conditions are met, the magnitude and duration of price increases will also depend on the market's ability to adapt to supply shortages.
Rachel Ziemba's comments to her colleague Mohamed Fathi on the Evening Session program add a different dimension to Goldman Sachs' scenario. She did not predict oil reaching $120, but she pointed to a number of factors that make the market more susceptible to further increases, including declining inventories, refinery capacity constraints, and continued supply disruptions.
As inventories decline, the quantities available to quickly replace lost barrels decrease. Furthermore, the constraints facing refineries could exacerbate the crisis's impact on refined fuel markets.
Indeed, prices for products such as diesel have risen at a faster pace than crude oil, with the Russian-Ukrainian war adding further pressure to supply shortages.
That's why Struveen said that Goldman Sachs, despite seeing room for crude prices to rise, prefers to hedge against geopolitical risks through buying positions in global natural gas and refined petroleum products, as it sees supply shocks as greater than those in the crude market.
But high prices also contain a mechanism to curb further increases. Zimba said that their continuation could begin to reduce consumption, while Russell Hardy, CEO of Vitol, expects global oil demand to fall by about 1.5 million barrels per day in 2026 compared to 2025.
Struveen also believes that China could play a balancing role in the crude oil market by reducing its imports if prices rise significantly, even though its refineries have recently increased their purchases, tightening short-term supplies.
What separates $98 from $120?
Reaching $120 requires, according to Dawood’s analysis, more than just the continuation of the war at the current level: a broader military escalation, a greater halt to flows through Hormuz, and disruption of the routes that compensate for part of the strait’s exports.
This intersects with Goldman Sachs’ scenario, which links the same level to a large and prolonged shock in Gulf exports, and not simply to more attacks.
But if millions of barrels continue to transit, and alternative routes remain capable of transporting oil, or if rising prices begin to weaken demand, the shock may remain strong without Brent reaching $120.
Thus, the level remains a conditional scenario, not a fundamental expectation: what will determine when it is reached is the amount of oil the market actually loses, the duration of its absence, and whether the compensation channels will remain open.
