Rising tensions in Middle East push oil prices higher: What’s next?

Tensions between Israel and Iran have heightened fears over global oil supply security, particularly concerning the Strait of Hormuz, a vital passage for nearly 20% of the world’s oil. Crude oil prices jumped on Monday to their highest levels since January, with Brent hitting as high as $81/bbl and WTI $78/bbl during intraday sessions.

Although prices reversed gains on Tuesday, they are still around 20% above the low levels seen in early May. Analysts warn that disruptions here could send Brent crude prices soaring, with forecasts ranging from moderate increases to sharp spikes potentially reaching $130 per barrel.

While some scenarios anticipate prices stabilizing around $75-$85, worst-case outcomes involving a closure of the strait or broader regional conflict could push prices well above $100, intensifying market volatility.

Goldman: Brent could hit $110 if Strait of Hormuz is closed

Goldman Sachs warns that if oil flows through the strait are halved for a month and remain down 10% for nearly a year, Brent crude could spike to $110 per barrel before easing to an average of $95 in late 2025. A 1.75 million barrel per day drop in Iranian exports over six months could push Brent to $90, then decline to the $60s by 2026. Goldman estimates a current geopolitical risk premium of about $10 per barrel.

Citi: A multi-month disruption could send prices to $90

Citibank expects a loss of 1.1 million barrels per day could keep Brent 15-20% above pre-conflict levels, at $75-$78 per barrel. A more severe, multi-month disruption affecting 3 million barrels per day could push prices to $90. Citi notes some impact may be offset by declining Iranian exports, lower Chinese demand, and increased output from other producers.

J.P. Morgan: Brent could reach $120-$130 depending on Hormuz

J.P. Morgan’s base case projects prices in the low-to-mid $60s through 2025, but a worst-case scenario—such as a Hormuz closure or wider regional conflict—could push Brent to $120-$130 per barrel, factoring in the loss of over 2.1 million barrels per day and possible retaliations.

Morgan Stanley: Brent to average $85 in H2 2025

Morgan Stanley raised its Brent forecast by $10, expecting an average of $85 per barrel in the second half of 2025 and $82.50 in early 2026. The base case assumes reduced Iranian exports, keeping prices at $75-$80. Prices could fall to $60 if tensions ease, but a Hormuz disruption could trigger a sharp rally.

Barclays also updated forecasts, projecting prices could reach $85 if Iranian exports are halved, with escalation pushing prices above $100.

Fitch: Risk premium to stay between $5 and $10

Fitch Ratings expects the geopolitical risk premium linked to Iran-Israel tensions to remain between $5 and $10 per barrel. However, disruptions to Iran’s production could push prices higher. Fitch notes that OPEC+ countries, including Russia and others, hold about 5.7 million barrels per day of spare capacity to cushion supply shocks.

Iran parliament approves Hormuz closure, final decision awaited

Meanwhile, in response to recent US strikes on Iranian nuclear sites, Iran’s parliament has approved a measure to close the strategic Strait of Hormuz. However, the final decision now rests with Iran’s national security council.

Experts warn that while the parliamentary move escalates tensions, the actual closure remains unlikely due to the significant economic and geopolitical risks for Iran, including alienating key trade partners like China. The strait’s closure would severely disrupt global oil supplies and could trigger sharp price spikes, but for now, commercial shipping continues unimpeded.