Goldman estimates geopolitical risk premium of around $10 per barrel for Brent after prices rise
June 18 (Reuters) - Following the rise in Brent prices to $76-77 per barrel, Goldman Sachs estimates a geopolitical risk premium of around $10 per barrel, the bank said in a note on Wednesday.
While its base case is that Brent declines to around $60/bbl in Q4 assuming no supply disruptions, Goldman said the $10/bbl premium appears justified in light of its lower Iran supply scenario where Brent spikes just above $90, and tail scenarios where broad regional oil production or shipping is negatively affected.
The Iran-Israel conflict has raised fears of potential supply disruptions in the Middle East, a key oil-producing region, pushing crude prices higher as traders react to the growing geopolitical risk.
President Donald Trump kept the world guessing on Wednesday whether the U.S. will join Israel's bombardment of Iranian nuclear and missile sites, as residents of Iran's capital streamed out of the city on the sixth day of the air assault.
Iran is OPEC's third-largest producer, extracting about 3.3 million barrels per day (bpd) of crude oil.
Brent crude futures settled 25 cents higher at $76.70 a barrel on Wednesday, while U.S. West Texas Intermediate crude rose 30 cents at $75.14.
Separately, Barclays said on Wednesday that if Iranian exports are reduced by half, crude prices could rise to $85 per barrel and that prices could move past $100 in the "worst-case" scenario of a wider conflagration.
Goldman said that the 45% decline in oil flows through the Bab-El-Mandeb Strait -- which connects the Red Sea to the Indian Ocean -- in 2025 versus 2023 illustrates the vulnerability of shipping to attacks from Iran-controlled Houthis.
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Powys County Times
37 minutes ago
- Powys County Times
Trump will not say whether he will move forward with US strikes on Iran
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The Guardian
41 minutes ago
- The Guardian
The Australia-US alliance is facing a decisive test, and not just over the Middle East
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With or without Australia's support, the US has no serious chance of winning a war with China over Taiwan. That means Taiwan would not be saved, the US position in Asia would be not preserved, and Australia's value as an ally would disappear. Like Vietnam, Iraq and Afghanistan, we would have followed Washington into a war that achieved neither its objectives nor ours but this time at unimaginably greater cost. That being so, we should give Washington a plain answer to its Taiwan question. The answer should be no. Hugh White is emeritus professor of strategic studies at ANU. His Quarterly Essay Hard New World: Our Post-American Future was published this month
Reuters
an hour ago
- Reuters
Gold prices tick up as Middle East tensions buoy demand
June 19 (Reuters) - Gold prices gained on Thursday, as rising tensions in the Middle East buoyed demand for the safe-haven asset, although the U.S. Federal Reserve's cautious stance on future rate cuts kept gains in check. Spot gold was up 0.2% at $3,376.48 an ounce, as of 0215 GMT. U.S. gold futures eased 0.4% to $3,393.70. "Gold has made a modest bounce as we await the next steps in the Israel-Iran conflict. If the U.S. does decide to get directly involved in the conflict this could raise the geopolitical stakes," KCM Trade Chief Market Analyst Tim Waterer said. Geopolitical tensions remained heightened as U.S. President Donald Trump on Wednesday refrained from confirming whether the U.S. would join Israel's bombardment of Iranian nuclear and missile sites, prompting residents of Tehran to leave the city amid ongoing air strikes. The U.S. military has moved some aircraft and ships from bases in the Middle East that may be vulnerable to any potential Iranian attack, two U.S. officials told Reuters on Wednesday. Gold is often used as a safe store of value during times of geopolitical and financial uncertainty. The Fed held interest rates steady on Wednesday. Fed policymakers still forecast slashing rates by half-a-percentage point this year, but they slowed the pace of future cuts. However, Fed Chair Jerome Powell cautioned against putting too much weight on this outlook, warning of "meaningful" inflation ahead as higher import tariffs loom. "The Fed was not as dovish as some had hoped, and I'd argue Powell was a tad more hawkish than many would like. The U.S. dollar is likely at oversold levels, and that is likely to cap gains on gold over the next few weeks," said Matt Simpson, a senior analyst at City Index. Elsewhere, spot silver eased 0.2% to $36.66 per ounce, platinum rose 1.5% to $1,342.36, while palladium gained 0.6% to $1,055.18.
