Goldman Sachs assesses "Iran shock": Oil price rises by US$18/barrel, equivalent to a 6-week closure of the Strait of Hormuz

By Ye Zhen

Source: Wall Street CN

Goldman Sachs estimates show the **current real-time risk premium of $18 per barrel** for crude oil is equivalent to a **full shutdown of the Strait of Hormuz for about six weeks**. If the strait is only partially closed (50% of traffic blocked) for one month, with alternative pipelines in use, oil prices would rise by **$4 per barrel**.

In the natural gas market, a one-month disruption through the Strait of Hormuz could send European natural gas prices **surging 130%**, with refined oil products and shipping rates also rising sharply.

As geopolitical conflicts in the Middle East escalate abruptly, the global energy market faces severe risks of supply disruptions.

According to追风交易台 (Zhuifeng Trading Desk), Goldman Sachs’ latest report states that the crude oil market has priced in a risk premium of **$18 per barrel** over the weekend. This magnitude equals the expected impact of a **full blockade of the Strait of Hormuz for six weeks**.

Over the weekend, Iran’s Supreme Leader Ali Khamenei was killed in military actions by the United States and Israel. Iran subsequently launched missiles and drones at U.S. assets and allies across multiple countries.

Three oil tankers in the region have reportedly been damaged, and a large number of carriers, oil producers, and insurers have shifted to a cautious wait-and-see mode.

Reflecting the shock, WTI retail trading products jumped **15%** over the weekend.

Goldman Sachs analysts including Daan Struyven note that the current $18/bbl real-time risk premium is at the **98th percentile since 2005**, and the bullish skew in the options market has hit its **highest level in 15 years**.

On Monday, WTI crude futures opened more than **11% higher**, and Brent crude soared **13%** at the open before paring gains.

Global natural gas and shipping markets have also been affected.

Goldman Sachs warns that if **LNG shipments** through the Strait of Hormuz are suspended for one month, European natural gas prices could surge **130%**.

Meanwhile, freight rates for Very Large Crude Carriers (VLCCs) from the Middle East to China **tripled** in the month leading up to Friday’s close.

## The Strait of Hormuz becomes the key variable

The Strait of Hormuz is a global energy artery, carrying roughly **one-fifth of the world’s oil and LNG supply**.

According to Goldman Sachs, crude oil exports through the strait reached **13.4 million barrels per day (bpd)** in 2025.

Although the International Energy Agency (IEA) estimates that **4.2 million bpd** of oil can be redirected via existing alternative pipelines, approximately **16 million bpd** of oil flows would be at risk under the extreme scenario of a full closure.

Regarding infrastructure damage, media reports indicate explosions at the **Kharg Island oil export terminal**, which handles over 90% of Iran’s crude oil exports, and an attack on the port of Duqm.

However, no substantial damage to oil production or export infrastructure in the region has been confirmed.

Goldman Sachs currently maintains its baseline energy price forecasts, assuming **no sustained supply disruptions**, but is closely monitoring high-frequency flow data.

## Oil price premium and scenario analysis

The $18/bbl real-time risk premium calculated by Goldman Sachs implies the market is pricing in a **1-year global supply disruption of 2.3 million bpd**, or roughly a **one-month full shutdown of the Strait of Hormuz** (with partial buffers from alternative pipelines).

The report also modeled different disruption scenarios:

- A **full one-month closure** of the strait, with no alternative pipelines or Strategic Petroleum Reserve (SPR) releases, would push the fair value of crude **$15 higher per barrel**.

- If all **4 million bpd** of alternative pipeline capacity is used, the increase would narrow to **$12/bbl**.

- If combined with a global SPR release of **2 million bpd**, the rise would fall to **$10/bbl**.

- A **partial one-month closure (50% flow blocked)**, with alternative pipelines in use, would lift oil prices by only **$4/bbl**.

## Supply buffers: Can spare capacity, inventories, and SPR provide support?

Goldman Sachs estimates global oil spare capacity is currently around **3.7 million bpd**, concentrated mainly in Saudi Arabia and the UAE.

However, if the Strait of Hormuz remains closed, the **physical ability** of OPEC+ to deploy this spare capacity would be directly constrained, as combined oil exports from Saudi Arabia, Iraq, and the UAE through the strait reached **13.1 million bpd** in 2025.

On inventories:

- Global visible inventories stand at around **7.827 billion barrels**, near the historical median at **74 days of demand**.

- OECD commercial inventories, the most predictive for pricing, are also near median levels.

- The U.S. Strategic Petroleum Reserve (SPR) is currently **415 million barrels**, roughly **180 million barrels lower** than at the end of 2021.

Notably, a U.S. Department of Energy official told the Financial Times there is “**absolutely no discussion**” about using the SPR, suggesting Washington believes any oil price spike will be limited in magnitude and duration.

OPEC+ announced on the day it would raise production by **210,000 bpd** in April, slightly above Goldman Sachs’ previous forecast of 140,000 bpd.

In addition, Goldman Sachs points out that U.S. shale oil’s price sensitivity has declined as resources mature, with significant production increases typically taking several quarters to materialize.

## European natural gas faces doubling risk

Unlike the oil market, European natural gas prices had **priced in almost no Iran-related geopolitical risk** before last Friday.

However, Goldman Sachs believes developments in the Middle East pose **significant upside risks** to European natural gas and global LNG prices.

The Strait of Hormuz typically carries about **80 million tons of LNG per year**, accounting for **19% of global supply**.

Goldman Sachs projects that a one-month complete suspension of LNG shipments through the strait would tighten natural gas inventories in Northwest Europe by the equivalent of **8% of total capacity**.

Under this scenario, the European natural gas benchmark (TTF) and Asian spot LNG (JKM) prices could reach nearly **€74/MWh ($25/MMBtu)**, **130% above current levels** — a threshold that triggered large-scale natural gas demand destruction during the 2022 European energy crisis.

By contrast, upside risks to U.S. natural gas prices are limited.

## Refined products and shipping rates surge

The conflict’s impact on refined products and shipping markets is equally direct.

While Iran only exports about **500,000 bpd** of refined products, limiting direct supply effects, roughly **9% of global middle distillates** (diesel, gasoil) and **18% of jet fuel** exports pass through the Strait of Hormuz.

A disruption would add further upside risk to already strong refining margins, especially in Asia.

Shipping and insurance rates are also set to rise sharply.

Goldman Sachs notes that global average crude freight rates have risen **50% (or $2.4/bbl)** year-to-date.

Even without further major disruptions in the strait, precautionary inventory hoarding and route rerouting will be enough to push already elevated tanker rates higher.

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The above content is provided by 追风交易台 (Zhuifeng Trading Desk).

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