Oil prices could surge 30%, if Iran blocks strait Of Hormuz

June 24, 2025 (MLN): Oil prices may surge another 30% to multiyear highs if Iran retaliates against recent U.S. strikes by blocking the Strait of Hormuz, a crucial chokepoint for global energy flows, Goldman Sachs warned.

Such a move could further complicate the ongoing battle against inflation.

Over the past two weeks, Brent prices have climbed 15%, but Goldman analysts cautioned that significantly more upward pressure could emerge.

According to a note from Goldman Sachs led by Daan Struyven, the investment bank’s co-head of global commodities research, Brent prices could jump above $110 per barrel if Iran closes the Strait of Hormuz.

Their scenario models a 50% decline in oil flows through the shipping route for at least one month, which would result in a 30% spike, pushing Brent to levels not seen since July 2022.

The Strait of Hormuz is the only maritime passage from the Persian Gulf to the open ocean and serves as a vital energy corridor.

The U.S. Department of Energy reported that about 20% of global oil consumption transited through the strait in 2024.

The department noted that few alternatives exist if the route is blocked.

Iranian state media reported that the country’s parliament supports closing the strait following the U.S. attacks, and at least two oil supertankers reversed course on Monday, according to Reuters.

Although Iran ranks as the ninth-largest oil producer globally, its geographic position gives it considerable leverage, as the Strait also facilitates nearly half of Saudi Arabia’s oil exports.

Higher oil prices are expected to lead to increased inflation. J.P. Morgan economists recently warned that if Brent prices remain above $75 through the summer, global consumer price index inflation could rise by 2%.

This poses additional challenges for the U.S., which is already grappling with inflationary pressures fueled by tariffs.

Former President Donald Trump weighed on social media, warning oil producers: “EVERYONE, KEEP OIL PRICES DOWN. I’M WATCHING! YOU’RE PLAYING RIGHT INTO THE HANDS OF THE ENEMY. DON’T DO IT!”

Despite the heightened geopolitical tensions, markets responded with relative calm.

The S&P 500 rose by 0.3%, and the yield on the 10-year Treasury note fell four basis points to just under 4.35%, reflecting a mild rally in bond markets.

“In terms of what this all means for markets going forward, it’s really all about whether the Iranian regime weaponizes oil,” wrote Deutsche Bank strategist Jim Reid.