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.
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.”
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).
Key events
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.
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
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.”
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.
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.
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.
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.
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.
Reeves: higher oil prices will impact UK economy
Chancellor Rachel Reeves has told reporters that the government is following developments in the Middle East very closely.
Asked about the potential impact on oil prices of closing shipping lanes that are crucial to global supplies, Reeves said:
“We want de-escalation because it’s the right thing for the Middle East, but we also want de-escalation because of the ramifications of conflict in the Middle East for the rest of the world including the UK.
“We have seen increases in oil prices in recent days and weeks, which of course will have an impact on the UK economy. We recognise the challenge that businesses and families face with energy costs.
“Of course, higher oil prices will have implications for the UK economy. One of the reasons we want de-escalation is to ensure that oil continues to flow and to ensure that that key route, both for oil and for wider trade – the Strait of Hormuz – continues to be open.”
At the end of May, before tensions between Israel and Iran soared, Brent crude was trading at $64/barrel, around 20% below its current levels.
Pound drops to one-month low
The pound is continuing to lose ground in the financial markets against the dollar.
Sterling has lost almost three-quarters of a cent today to $1.3380, its lowest since 21 May.
Potential geopolitical dangers, such as Iran’s threats to close the Strait of Hormuz, are providing support for the dollar.
George Vessey, lead FX & macro strategist at foreign exchange payments firm Convera, explains:
Over the weekend, President Trump launched airstrikes on three Iranian nuclear facilities — a move that not only bolstered Israel’s campaign to dismantle Iran’s nuclear program but also drew the U.S. further into the regional conflict. The decision surprised many. Trump had previously campaigned on an anti-interventionist platform, advocating against deeper U.S. entanglement in the Middle East. And as recently as late last week, he appeared willing to give diplomacy a two-week window before resorting to military action. That posture changed swiftly.
In the lead-up to the strikes, markets were pricing in diplomatic progress: the euro strengthened, the dollar softened, safe havens were muted, and oil dropped nearly 3% on Friday — signaling a partial return to the pre-conflict playbook. But the U.S. intervention has now reversed that momentum.
While the broader bias still leans toward structural dollar weakness, escalating Middle East tensions are injecting support for the greenback via the commodity channel. That channel will remain central in the days ahead, as Iran — according to state-run TV — has vowed to retaliate by closing the Strait of Hormuz, a critical artery through which about one-fifth of global oil flows. Although any such action would require approval from Supreme Leader Ayatollah Ali Khamenei, it would mark a first in the Islamic Republic’s nearly five-decade history. As such, even the threat alone is enough to keep the dollar bid, with positioning set to adjust as investors begin to unwind their bearish US dollar bets.
This map, from LSEG, shows just how busy the Strait of Hormuz is today.
It is 33km wide at its narrowest point, with the shipping lane just 3km wide.
Members of the Organization of the Petroleum Exporting Countries (OPEC) – Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq – export most of their crude via the strait, mainly to Asia.
Lauren Almeida
Tim Gould, chief energy economist at the International Energy Agency, has said greater geopolitical uncertainty will be an “important driver” of change in the clean energy transition.
Speaking at the Net Zero Delivery Summit in London this morning, Gould said an uptick in clean energy spending had happened “in particular since Russia’s invasion of Ukraine in 2022” and also “with intensifying conflict in the Middle East”.
It has been “an important driver for the deployment of clean technologies”, he said, adding:
“That may sound a little bit counterintuitive because you sometimes hear the view that if you are interested in energy security you invest in fossil fuels, if you are interested in emissions reductions you invest in renewables. But the reality is significantly more complicated.”
While there are a range of motivators behind the decision to transition to clean energy, he said, “energy security” is an important reason to bring new technology into the system.
“That was a big theme that we picked up during a recent summit held jointly with the UK government on the future of energy security.
“Since 2022 we have seen a very rapid pick up in the pace of spending on energy transition and in today’s insecure, low trust world I think that preference for homegrown energy, particularly in fuel importing countries and regions, will continue to be an important driver of change.”
A report by the IEA earlier this month found that global energy investment is set to increase in 2025 to a record $3.3trn, with clean energy technologies attracting twice as much capital as fossil fuels.
Investment in clean technologies such as renewables, nuclear, grids, storage, low-emissions fuels, efficiency and electrification, is on course to hit a record $2.2trn this year, the IEA found. Investment in oil, natural gas and coal is on track to hit $1.1trn.
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.
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.”
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).
Industrial strategy criticises ‘over-bearing and feeble’ state
The UK’s industrial strategy also has a damning verdict on the role of the state, saying:
For too long Britain has had a state which, paradoxically, both stands back and interferes too much. When our industries were at the mercy of change, too many people and communities were left to fend for themselves, with government uninterested in providing a bridge to the future. Yet equally, when new opportunities present themselves, Britain often finds itself too regulated to take advantage, or too cautious to change course.
The result is a state that is both over-bearing and feeble, poorly serving an economy that has become too reliant on one place, too exposed to global volatility and too sluggish to take advantage of transitions.
UK launches ‘modern industrial strategy’
The UK government is attracting praise, and criticism, after outlining its new industrial strategy to support the British economy.
Dubbed the ‘modern industrial strategy’, the plan (which you can read here) aims to increase business investment and grow the industries of the future.
It focuses on eight important sectors: advanced manufacturing, creative industries, life sciences, clean energy, defence, digital and technologies, professional and business services, and financial services.
The ‘growth mission’ breaks down into ten parts:
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Tackling high industrial electricity costs, including slashing green levies on thousands of businesses to bring down bills, and investing in the electricity grid so companies can get ‘timely grid connections’
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Promoting free and fair trade through strong international partnerships, including securing new and improved trading arrangements with a pragmatic, agile, smart and fair approach to navigating a fragmented, geopolitically volatile, and tech-driven world.
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Strengthen the UK’s economic security through the uplift in defence spending
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Expanding access to finance, by giving the British Business Bank additional capital and expanding the mandate of the National Wealth Fund
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Driving innovation, underpinned by an £86bn investment into UK R&D
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Treating UK data as an economic asset
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Reforming the skills and employment support system to create a strong pipeline of skilled workers,
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Reducing regulatory burdens and cutting the administrative costs of regulation for business by 25%.
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Removing planning barriers, and fast-tracking decisions on critical projects in the planning system.
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Ensuring the tax system supports growth and high-growth sectors
Ministers say they are offering investors political stability in this uncertain world, saying:
Business-as-usual will not work. We need a new relationship between business and government, where government provides the strategic certainty that allows businesses to do what they do best: create wealth. This requires a more muscular approach to government: one prepared to back British businesses, invest in our comparative advantage, and take punts in pursuit of growth and productivity.
And this government understands the importance of agility and enterprise; to relentlessly ask whether regulations are blocking the conditions for Britain to thrive.
Recruitment and Employment Confederation (REC) chief executive Neil Carberry is pleased that Professional and Business Services is one of the eight high-growth sectors identified.
Carberry says:
“Firms need stable foundations from the state to deliver business investment and productivity growth. That’s what will increase prosperity and tackle the shortfall in the public finances.
This Industrial Strategy is an important chance to finally make progress on this over the long term, forming a new partnership between business and government. The test now is whether the strategy can be delivered, not just by the Department for Business, but at the core of all government policy.
The hospitality sector, though, is disappointed to miss out on any new support.
Kate Nicholls, chief executive of UKHospitality, argues that the strategy ignores much of the economy:
“This is not an industrial strategy that will deliver growth equally across the UK. In fact, by ignoring 70% of the economy it is at odds with the Government’s ambition to create jobs and help people into work.
“Once again, growth will be distributed unevenly and centred around small industrial clusters that have high barriers to access – hardly a recipe for driving social mobility.
“We were desperate to see a plan for hospitality and the high street, which together employs over 7 million people. We were disappointed.
“How can national renewal be properly delivered if 70% of the economy is excluded from the Government’s flagship plan for growth?
Oil slips back from five-month highs
Oil has slipped back from its earlier highs, and is now slightly down this session.
Brent crude is now trading at $76.85 per barrel, down 0.25% today (it closed at $77.01/barrel on Friday night). Its early spike to $81.50 per barrel, a five-month high, has not lasted long.
AJ Bell investment director Russ Mould says:
“The markets are not yet reacting with any degree of panic to the US airstrike on Iran’s nuclear facilities as they await to see how Tehran responds.
The promised two-week hiatus as the US weighed its decision didn’t materialise as the Trump administration acted on Saturday. After briefly spiking above $80 per barrel when the market opened in Asia on Monday, Brent pared those gains to trade modestly higher.
UK company growth hits three-month high
Growth across UK businesses accelerated slightly this month, but remains weak.
The latest poll of purchasing managers at British companies shows that output picked up this month, as the private sector recovered from a drop in April.
The services sector expanded, while manufacturing shrank again.
Some companies reported a pick-up in order books, and client confidence, after the US rolled back its tariff announcements.
But, global trade tensions and “rising geopolitical uncertainty” were cited as headwinds to growth, particularly in manufacturing.
Overall, the flash UK PMI composite output interest rose to 50.7 this month, from 50.3 in May, showing the fastest growth in three months.
S&P Global, which produces the report, says it is consistent with economic growth of around 0.1% in the April-June period.
Chris Williamson, chief business economist at S&P Global Market Intelligence, says:
“The UK economy remained in a sluggish state at the end of the second quarter, according to the early PMI survey data.
“Although business conditions have continued to improve since April’s downturn, quelling recession fears, growth of business activity remains disappointingly lacklustre.”
Airlines are weighing up how long to suspend Middle East flights, after the conflict in the region entered a new phase with the US attacs on Iran, Reuters reports.
Leading Asian carrier Singapore Airlines, which described the situation as “fluid”, moved to cancel flights to Dubai through to Tuesday, having previously cancelled only its Sunday service.
IAG group member Iberia cancelled Sunday’s and Monday’s Doha flights after making its own assessment, a spokesperson said. It has not made a decision regarding later flights.
Air France KLM cancelled flights to and from Dubai and Riyadh on Sunday and Monday, and Finnair cancelled flights from Doha until at least Tuesday.
Kazakhstan’s Air Astana cancelled flights to Dubai on Monday.
More here: Airlines weigh Middle East cancellations after US strikes in Iran
Over at Heathrow, a BA flight to Dubai that was due to leave at 12.50pm today has been cancelled, as has a 1.45pm Doha flight (although a 9.25pm flight to Doha is still shown to be operating…)
