Goldman Sachs warns oil could hit $120 as Trump vows strike on Iran

US President Donald Trump has vowed to attack Iranian nuclear facilities as tensions in the Middle East continue to escalate, marking a significant intensification of geopolitical friction in the region. The statement follows previous incidents involving Iranian forces, including reports that Iran shot down a US helicopter, which had previously prompted Trump to vow a response.

The prospect of direct military action has immediate implications for global energy markets. Goldman Sachs has issued a warning that oil prices could surge to $120 per barrel if disruptions to the Strait of Hormuz persist. The strategic waterway is a critical chokepoint for global oil supplies, and any sustained interference there would likely trigger severe volatility in commodity markets.

This latest development occurs against a backdrop of recent diplomatic activity between Washington and Beijing. Earlier this week, President Trump and Chinese President Xi Jinping held a two-day summit in Beijing, addressing issues including trade, artificial intelligence, and the rising tensions surrounding Iran.

During the summit, US equity markets posted modest gains. The Dow Jones Industrial Average rose 0.8 per cent, the S&P 500 increased by 0.3 per cent, and the Nasdaq Composite climbed 0.2 per cent. Additionally, Nvidia shares surged more than 2 per cent following news that the US had approved H200 chip sales to Chinese firms.

The juxtaposition of diplomatic progress in trade and technology with the escalating military rhetoric in the Middle East highlights the complex risk environment facing investors. While the US-China summit provided some stability for tech and broad equity markets, the threat to Iranian nuclear infrastructure and the potential for sustained disruption in the Strait of Hormuz remains a significant overhang for energy prices.

Goldman Sachs’ projection of $120 per barrel is conditional, hinging on the duration and severity of any disruption to the Strait of Hormuz. The bank’s warning underscores the sensitivity of oil markets to geopolitical shocks in the region, particularly as the US president signals a willingness to expand military operations beyond previous incidents.

As the situation develops, market participants are closely monitoring both the implementation of Trump’s vow and the actual status of shipping traffic through the Strait of Hormuz. The interplay between political rhetoric and physical supply constraints will likely dictate near-term price action in the energy sector.