Goldman Sachs has outlined possible scenarios that could lead to higher oil prices. While there’s no current expectation of significant disruptions in oil and natural gas supplies, future risks could still impact energy prices. One significant risk is the Polymarket prediction of a potential disruption in the Strait of Hormuz by Iran in 2025. If Iran’s supply drops by 1.75 million barrels per day, Brent crude oil prices could rise to about $90 per barrel. If there are additional disruptions that cut oil flow through the Strait by 50% for one month and then reduce it by 10% for the next eleven months, prices could briefly hit $110.

Impacts On European Natural Gas Markets

The report mentions that European natural gas (TTF) and LNG markets could react to a higher risk of supply disruptions. TTF prices could jump to 74 EUR/MWh or $25/MMBtu. Goldman Sachs details market scenarios in case oil supply interruptions occur, especially due to geopolitical tensions in the Middle East. Currently, supplies are stable, but the balance between demand and geopolitical risk is delicate. A key worry arises from Polymarket’s inference that Iran might disrupt navigation through the Strait of Hormuz in 2025. This strait is crucial, as it handles a large portion of global oil exports. A significant drop in Iranian exports—like a decrease of 1.75 million barrels per day—would send Brent crude prices near $90 per barrel. This isn’t just a guess; it’s based on past market reactions to similar supply constraints. Even more troubling would be if half of the Strait’s exports were halted for a month, followed by a 10% reduction for almost a year—possibly pushing crude prices up to $110. Natural gas is also part of the analysis. The European TTF benchmark could be affected; disruptions in LNG supply might push TTF to €74 per megawatt hour, or about $25 per million BTU. Europe’s reliance on LNG has grown, especially after reducing dependence on Russian pipeline gas. This means prices are more sensitive to logistics and shipping issues, even if demand stays steady.

Strategic Adjustments And Monitoring

What can we learn from this? For short-term trading strategies based on price derivatives, it’s crucial to consider potential volatility linked to geopolitical events rather than just market fundamentals. Options pricing may rise with any escalation in regional tensions or risks affecting the Strait’s passage. This volatility, which had been declining, might widen again. Gas-related contracts will need careful tracking of global LNG movements and storage levels. Any signs of congestion at LNG terminals or delays in tanker transit could quickly shift market balances. Watch for weather-related disruptions in key areas like the Suez or Panama Canals. Traders should be adjusting their exposure as summer cooling demand approaches, factoring in risks for later-month contracts. Short-term positions might stay stable unless explosive events happen sooner than expected. Political developments and valid shipping warnings require ongoing attention. The market is currently expecting stability, but there’s a defined range where this assumption might falter. Volatility hasn’t vanished; it’s just been repriced. Meanwhile, differences in crude benchmarks or LNG hubs could present trading opportunities. Positioning across markets might be more appealing if Brent and WTI react differently to shipping risks in various areas. Also, monitoring gas contracts in Asia could help gauge demand, especially if it begins pulling cargoes eastward, tightening balances in Europe before autumn. Overall, staying flexible in response to uneven risk scenarios is not just advisable—it could determine trading success. Create your live VT Markets account and start trading now.

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