Oil could soar 27% to $125 a barrel by May as the Russia-Ukraine conflict triggers a 'supply shock', Goldman Sachs says

• Oil could soar more than 25% to $125 a barrel by May if the Russia-Ukraine conflict creates a supply shock, Goldman Sachs said.
• Brent crude jumped above $105 a barrel Thursday, but later cooled as the West held back from sanctions on Russia's energy industry.

Oil could soar more than 25% to $125 a barrel by May if the Russia-Ukraine crisis triggers a "supply shock" in global markets, Goldman Sachs said.

Russia shocked the world by invading Ukraine Thursday and was pounding the capital Kiev with missiles Friday.

Oil prices spiked Thursday as the invasion began, reflecting the importance of Russia in energy markets. Brent crude rose to a seven-year high of close to $106 a barrel before settling at just under $100.

But prices could go much higher in the coming months, according to Goldman analysts led by commodities chief Jeff Currie .

"Uncertainty around potential sanctions is beginning to create a potential supply shock," they told clients in a note Thursday.

A supply shock is when an event suddenly increases or decreases supply, often leading to big price moves.

Brent crude was down 0.99% to $98.10 a barrel Friday at 6.52 a.m. ET, while WTI crude was 0.82% lower at $92.09. Brent would have to rise 27% to hit $125, as of last check.

The Goldman analysts said the risk of sanctions hitting Russian energy suppliers, Germany's move to cancel a major Russian gas pipeline, and the chance that the US fails to reach a nuclear deal with Iran were all factors that could hold down the supply of oil.

Read more: Deutsche Bank says an escalation of conflict in Russia and Ukraine could force gas prices 50% higher and see oil rise 20%. Here are the 6 sectors of the market most vulnerable to those increases — and the 2 set to be beneficiaries

So far, Western sanctions have stopped short of hitting Russia's energy sector. US President Joe Biden said Thursday that he will do "everything in my power to limit the pain the American people are feeling at the gas pump."

However, the UK on Thursday pushed for Russia to be cut out of Swift, a key global payments system. Such a move could disrupt payments for Russian oil and gas, cutting supply.

Ukrainian President Volodymyr Zelensky said the international community needs to impose tougher sanctions on Russia.

If sanctions are extended to the energy market, Goldman analysts said they'd likely pencil in oil to hit $125 a barrel within the next three months.

Consultancy Rystad Energy said oil could hit $130 a barrel as the war jeopardizes supplies, although it did not specify a timeframe.

"The reality is that significantly higher prices are on the horizon in Europe and overseas," Rystad CEO Jarand Rystad wrote in a Thursday note to clients.

However, markets were calmer Friday after a wild day Thursday. That's in part because European countries, specifically Germany, seem reluctant to hit Russia with tough energy sanctions and endanger their own supplies, analysts said.