Oil Jumps as Supply Risks Mount; Goldman Raises Price Outlook

Oil prices climbed sharply again on Wednesday, building on strong gains from the previous two sessions, as the escalating confrontation among the U.S., Israel, and Iran heightened fears of supply disruptions.

By 03:40 ET (08:40 GMT), Brent Oil Futures for May delivery had advanced 3.5% to $84.25 per barrel, while WTI Crude Oil Futures rose 3.4% to $77.10 per barrel. Both benchmarks had already rallied nearly 5% on Tuesday, after jumping about 7% at the start of the week, with Brent touching its highest level since July 2024.

Supply risks dominate sentiment

The conflict erupted over the weekend when U.S. and Israeli forces carried out coordinated strikes on Iranian military targets, reportedly killing Ali Khamenei. Fighting continued into Wednesday, with U.S. Admiral Brad Cooper stating that more than 2,000 Iranian targets had been struck.

Tehran has retaliated with missile and drone attacks on neighboring Arab countries hosting U.S. bases and has issued threats to international shipping. Oil tankers passing through the Strait of Hormuz—a chokepoint responsible for roughly 20% of global crude shipments—have been specifically targeted.

The mounting threat to this key transit route for exporters such as Saudi Arabia, Iraq, and the UAE has injected a sizable geopolitical risk premium into oil markets. ING analysts noted that disruptions in the Strait are beginning to impact upstream flows. They also cited reports that Iraq has curtailed output at its largest oilfields, including Rumaila and West Qurna 2, taking around 1.2 million barrels per day offline.

Goldman raises 2026 outlook

On Wednesday, Goldman Sachs lifted its average price forecast for the second quarter of 2026, raising Brent by $10 to $76 per barrel and WTI by $9 to $71.

The bank’s projections assume that reduced flows through Hormuz will significantly draw down OECD inventories and Middle East production in March. Goldman emphasized that risks remain skewed to the upside, particularly if export disruptions persist longer than expected or if oil infrastructure sustains damage.

It added that if volumes through Hormuz remain constrained for another five weeks, Brent could climb to $100 per barrel—a level likely to trigger demand destruction to prevent inventories from dropping too low.

However, analysts cautioned that the supply-driven rally could eventually undermine demand. Prolonged high prices may stoke inflation and compound broader economic risks, potentially dampening consumption and weighing on crude prices over time.

U.S. pledges support for shipping

Investors are also watching remarks from Donald Trump, who said the U.S. Navy would escort commercial vessels if necessary and pledged government backing to ensure safe passage through the Strait.

ING pointed out that insurers have begun withdrawing war-risk coverage for ships transiting Hormuz. While U.S. assurances may offer some relief, analysts cautioned that restoring confidence in shipping lanes will take time.

Although military escalation has fueled the rally, signs of coordinated international efforts to safeguard maritime traffic could help limit further near-term gains.

Sources: Peter Nurse