"It's All About Israel's Response": What Happens To Oil Next, According To Goldman's Commodity Traders

While the geopolitical situation and the potential Israeli response remain "fluid", below we are sharing some thoughts from Goldman's commodity desk, led by Daan Struyven, on how Iran’s attack on Israel may impact the oil market in Q&A format.

Q1. What are the key factors driving any potential reaction in oil prices to the events over the weekend?

The medium-run fundamental impact of geopolitical developments on oil prices ultimately depends on the effect they have on oil supply, oil demand, and oil inventories, inclusive of OPEC’s supply policy response. Because OPEC spare capacity is elevated, we still see geopolitical impediments to OPEC’s ability and/or desire to deploy spare capacity as the key upside risk to oil prices.