Goldman Sachs warns Brent crude could rise over $100 per barrel if Strait of Hormuz is disrupted
Although the oil price’s early spike last night didn’t last, economists predict energy prices would soar if there was significant disruption to supplies from the Middle East.
Goldman Sachs have predicted that disruptions to shipping through the Strait of Hormuz could push the price of Brent crude over $100 per barrel.
That would be its highest level since August 2022, and almost a third higher than its current level of $77/barrel, pushing up transport costs, lifting inflation and hurting growth.
Photograph: Goldman Sachs
Bloomberg explains:
If oil flows through the Strait of Hormuz were to drop by half for a month, and remained 10% lower for another 11, Brent would spike briefly to as much as $110 a barrel, analysts including Daan Struyven said in a note. Should Iranian supply fall by 1.75 million barrels a day, Brent would peak at $90.
However, Goldman’s baseline assumption is that that physical disruptions to Iran supply and regional oil and gas production and shipping are avoided; in that scenario, Brent crude falls to $60/barrel by the end of the year.
As we reported last night, Iran’s parliament has voted to shut down the vital Hormuz shipping channel in retaliation against Donald Trump’s attack on the country.
Goldman analysts argue that there are strong incentives to avoid disruption to the Strait of Hormuz, which carries a fifth of global oil. They say:
“The economic incentives, including for the US and China, to try to prevent a sustained and very large disruption of the Strait of Hormuz would be strong.”
A map of the Middle East
Professor Costas Milas, of the Management School at the University of Liverpool, tells us:
Following Trump’s direct intervention in the Israel-Iran war, geopolitical risk is on the rise and oil prices are expected to stay higher than previously thought. What are the implications for the UK economy and UK interest rates?
The good news first: As I discussed in an LSE Business Review Blog (jointly with Michael Ellington from Liverpool University), the adverse impact of geopolitical risk and inflation on the UK economy has diminished over time.
The bad news next: Higher oil prices are expected to increase inflation for up to four quarters. The negative impact of inflation on UK growth will take up to three quarters to show up. Geopolitical risk is expected to depress output for two to three quarters. The BoE’s monetary policymakers will have to make a judgement on whether the negative impact on GDP growth outweighs the inflationary impact. If so, Bank Rate will be cut in early August, if not earlier (through an unscheduled meeting in July).
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Updated at 05.58 EDT
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The Rhone river at Lyon Photograph: Alicia Canter/The Guardian
Elsewhere in the energy sector, the hot weather is hampering output at a nuclear power plant near Lyon.
High water temperatures on the Rhone river in eastern France are expected to affect electricity production at the 2.6 gigawatt (GW) Saint-Alban nuclear plant from 1 July, nuclear operator EDF said in a notice on Monday.
This is the second notice for high river temperatures after the Bugey nuclear plant was flagged last week, Reuters points out.
Nuclear stations use a large amount of water to cool their systems, which they return back to rivers, lakes or the sea afterwards. Problems occur when the water intake is too warm to cool the plant, and when the hot water being returned to the river or sea kills fish and other wildlife.
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Donald Trump is also urging America’s energy department to encourage more oil and gas extraction across the US (a familiar Trump mantra).
He posts:
To The Department of Energy: DRILL, BABY, DRILL!!! And I mean NOW!!!
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Trump: EVERYONE, KEEP OIL PRICES DOWN. I’M WATCHING!
Fresh from launching his bombing attack at Iran, president Donald Trump has urged ‘everyone’ to keep oil prices down.
Posting on his Truth Social site a moment ago, the US president says:
EVERYONE, KEEP OIL PRICES DOWN. I’M WATCHING! YOU’RE PLAYING RIGHT INTO THE HANDS OF THE ENEMY. DON’T DO IT!
At pixel time, oil prices are broadly flat today, with Brent crude up 0.2% at $77.17 per barrel.
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Christine Lagarde also points out to MEPs that support for the euro has reached an all-time high, showing them a chart to prove it:
A chart showing support for the euro Photograph: ECB
She tells the European Parliament:
Now is the time to make the euro area economy more productive, competitive and resilient. We need to see targeted fiscal and structural policies and strategic investments.
Lagarde also calls for a legislative framework to pave the way for the potential introduction of a digital euro to be put in place rapidly, adding:
By making the right policy choices, we can leverage the current momentum to boost the economic perspectives for Europe and its citizens.
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Lagarde: Risks to the growth outlook remain tilted to the downside
Over in Brussels, the head of the European Central Bank is warning that geopolitical risks could hurt eurozone growth.
ECB president Christine Lagarde told the European Parliament’s Committee on Economic and Monetary Affairs that higher tariffs and a stronger euro are expected to dampen exports, with high uncertainty delaying investment decisions.
Lagarde says:
Risks to the growth outlook remain tilted to the downside, however. In particular, growth could slow in the event of a further escalation in global trade tensions and the associated uncertainties, deteriorating financial market sentiment and continued geopolitical tensions.
That being said, a swift resolution to trade and geopolitical tensions or a further increase in defence and infrastructure spending could spur activity by more than expected.
Lagarde also tells MEPs that the outlook for euro area inflation is more uncertain than usual; frictions in global trade present both upside and downside risks.
She says:
Upside risks include a possible fragmentation of global supply chains, while downside risks include lower demand for euro area exports and countries with overcapacity rerouting their exports to the euro area.
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The Green Party have also criticised Reform’s new “Britannia Card”, calling it a wheeze to prop up the super wealthy.
They cite data suggesting that giving wealthy foreigners and returning British expats a bespoke tax regime in exchange for a one-off payment of £250,000 would cost tens of billions in lost tax.
Green Party co-leader Adrian Ramsay MP says:
“Nigel Farage’s latest wheeze to prop up the super wealthy, dressed up as helping the poorest, would result in an estimated loss of a whopping £34bn to the Treasury [1]. Rather than enabling the super-rich to buy their way out of paying UK tax, the Green Party would tax investment income as equivalent to earned income and introduce a wealth tax based on assets. This is the way to fix our public services to benefit everyone.
“This is another reminder that Reform UK is a Party run by multi-millionaires out to look after their own and with net zero interest in the rest of us. There’s nothing patriotic about a “Britannia card” that would let the ultra-wealthy avoid paying taxes and contributing to society.”
The £34bn figure was calculated by tax expert Dan Neidle, based on the revenue that would be lost from the current regime for non-doms.
The amounts involved are very large. The Office for Budget Responsibility’s assessment of the recent Conservative and Labour non-dom reforms says they raise a net £33.9bn from 2026/27 to 2029/30 (most of which is from the Conservative March 2024 reforms): pic.twitter.com/OU0Ltst3yx
— Dan Neidle (@DanNeidle) June 23, 2025
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UK promises £41m to improve train wifi
Gwyn Topham
Detail of bigger commitments, such as Northern Powerhouse Rail, continue to be merely teased in today’s UK Industrial Strategy, but there are a couple of firm and specific pledges of interest to the railway.
First, an East Coast mainline at Tempsford, Bedfordshire – a village that is destined to become a major new town.
And secondly, an attempt to resolve that perennial trouble – train wifi. Two years after the Department for Transport was considering telling operators to simply give up on the substandard service, the government is now turning to space to solve the problem, spending £41m to introduce low-earth-orbit satellite connectivity on all mainline trains.
The government says it will “significantly improve both the availability and internet connection speeds for wi-fi connected passengers, in turn enabling a better-integrated transport network.”
ShareA chart showing the importance of the Strait of HormuzShare
Reeves roasts Farage over ‘Britannia Card’ proposal
Heather Stewart
Rachel Reeves has gleefully laid into Nigel Farage’s plan for a £250,000 flat-rate fee for wealthy foreigners – which some have compared to Donald Trump’s “golden visa”.
Reform’s “Britannia Card” would allow returning expats and rich new arrivals lower taxes, in return for the levy – promising to spend the proceeds on low-income workers.
However, the chancellor insisted the plan was “worse than a gimmick”.
“Basically, it’s a massive tax cut for foreign billionaires,” she said, speaking to reporters in Nuneaton as Labour launched its industrial strategy.
“It takes you back to a system that is even more generous than what the Tories had under Rishi Sunak. We tightened up the rules to bring in more than £33bn in tax revenue by ensuring that if people make Britain their home, they pay their taxes here, That’s what Labour’s ensuring.
She added:
“This opens up serious questions about what taxes will have to go up on working people and what public services, including the NHS, would have to be cut to afford a giveaway for foreign billionaires. If this is their first proper policy, then, you know, this is going to unravel pretty quickly.”
The chancellor was also challenged about Friday’s public finances data, which showed the deficit for May running ahead of the Office for Budget Responsibility’s projections, prompting predictions of tax rises in the autumn.
“That’s just one month’s worth of public finance data. It came in slightly higher than the OBR, but slightly lower than market expectations and obviously these numbers are all subject to revisions. So I wouldn’t read too much into one month’s data,” she said.
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The majority of Iran’s oil exports are directed to China, with the remainder primarily going to other Asia-Pacific nations, new analysis from Deutsche Bank shows.
Photograph: Deutsche Bank
Their market strategist Jim Reid explains:
Most of these shipments pass through the Strait of Hormuz—a critical chokepoint for global energy markets. Despite being just 21 nautical miles wide at its broadest point, the strait handles a significant share of Middle Eastern oil exports. It features two narrow 2-mile-wide shipping lanes, separated by a 2-mile buffer zone.
Given these constraints, the continued accessibility of the Strait of Hormuz is pivotal to the global economic outlook—especially following U.S. involvement in the regional conflict over the weekend. As the chart suggests, China is likely to play a key role in influencing Iran’s strategic choices.
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European gas prices have risen today, as traders assess the risks of supply disruption.
The benchmark Dutch front-month contract has gained 2% today to €41.50 per megawatt hour (MWh) this morning. That would be its highest closing level since the start of April.
Jess Ralston, head of energy at the Energy and Climate Intelligence Unit (ECIU) says:
“Oil and gas are commodities that are particularly vulnerable to price spikes as a result of conflicts and geopolitical events; this has always been the case and always will be.
The UK is particularly exposed to increases in gas prices as we are reliant on the fuel for around 30% of our power generation and 85% of our home heating, which resulted in us being the worst hit by the gas crisis in western Europe, according to the International Monetary Fund.
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Three empty oil and chemical tankers have diverted away from the Strait of Hormuz and changed course, according to Marine Traffic ship tracking data reported by Reuters.
The Marie C and Red Ruby, which were in ballast rather than carrying cargo and previously sailing towards the Strait, dropped anchor near Fujairah off the United Arab Emirates coast.
The Kohzan Maru was sailing in the Gulf of Oman close to Omani waters, according to data on the MarineTraffic platform.
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