Introduction#
Goldman Sachs has recently adjusted its oil price forecasts, anticipating longer disruptions in the Strait of Hormuz, a crucial shipping route for oil. The bank warns that if these disruptions continue, oil prices could rise significantly.
Disruption Scenario#
Analyst Daan Struynen stated that Goldman now expects a 21-day period where oil flow through the Strait of Hormuz could be reduced to just 10% of normal levels, up from a previous estimate of 10 days. Following this, a gradual recovery over 30 days is anticipated. This scenario could lead to an estimated loss of 16.2 million barrels per day (mb/d) in Persian Gulf oil exports, marking it as the largest oil supply shock recorded.
Updated Price Forecasts#
With these changes, Goldman Sachs has revised its average Brent crude oil price forecast for the fourth quarter of 2026 to $71, an increase from the previous estimate of $66. For West Texas Intermediate (WTI) crude oil, the forecast has risen to $67. The bank's analysis also considers a stronger policy response and increased investment in hard assets due to geopolitical tensions.
Market Implications#
In the short term, Struynen noted that uncertainty regarding the duration of disruptions could lead to higher oil prices as markets await clarity. He emphasized that a significant risk premium may be necessary to encourage demand reduction. Moreover, Goldman estimates that coordinated global actions, such as releasing 254 million barrels from strategic reserves, could mitigate the impact on oil inventories by nearly 50%. However, the situation remains unpredictable; a swift conclusion to U.S. military actions could lower prices, while prolonged disruptions could lead to severe consequences.
In a scenario where disruptions last 60 days, Goldman Sachs projects Brent prices could reach $93 and WTI at $89. As of Thursday, Brent is trading above $96, while WTI is around $91.50.