Oil price expectations raised again! Goldman Sachs’ latest assessment: High oil prices will last longer, and oil prices will hit record highs in two scenarios

# Long Yue

Source: Wall Street CN

Goldman Sachs has extended the period during which Strait of Hormuz flows remain at “only 5%” of normal levels from three weeks to six weeks and introduced a higher structural security premium. Accordingly, the bank has raised its forecast for Brent crude’s average price in March–April to $110 per barrel and its 2026 full-year average to $85 per barrel. If the Strait of Hormuz disruption lasts 10 weeks, Brent prices could surpass the 2008 record of $147 per barrel.

As the Middle East conflict enters its fourth week, spot Brent and WTI crude prices have surged to $112 and $98 per barrel, respectively. Citing the extended supply outage and a reshaping of global energy security logic, Goldman Sachs has comprehensively raised its oil price forecasts for this year and next, warning that in extreme scenarios prices could hit a new all-time high of $147 per barrel.

According to Zhuifeng Trading Desk, Goldman Sachs analyst Daan Struyven and his team released the latest crude oil market report, noting that due to the ongoing Persian Gulf geopolitical conflict, shipping disruptions through the Strait of Hormuz are more severe than expected, and the market is facing a structural repricing of supply risks.

The bank now expects Brent crude to average $110 per barrel in March–April 2026 (previously $98), representing a 62% surge from the 2025 full-year average. Meanwhile, the 2026 full-year Brent forecast has been raised to $85 per barrel, while the 2027 average remains elevated at $80 per barrel.

## Core Logic: 6-Week “Shutdown” Assumption + Structural Security Premium

Analysts stated in the report that the most direct reason for the price upgrade is a revised outlook for Strait of Hormuz (SoH) flows.

“First, we now assume that Strait of Hormuz flows will remain at just 5% of normal levels for six weeks (previously three weeks at 10%), followed by a gradual one-month recovery period.”

Three theoretical paths exist for a rebound in SoH flows: Iran allowing partial safe passage, de-escalation of the conflict, or military escort operations.

However, analysts emphasized that uncertainty remains high, and its “six-week” assumption falls between two benchmarks: on one side, U.S. policymakers have suggested military operations could last 4–6 weeks; on the other, prediction markets reflect a median conflict duration. The report cites prediction market probabilities: a 24% chance the conflict ends by April 15, 39% by April 30, and 50% by May 15.

Beyond the longer disruption assumption, the report’s second core pillar is a **structural security premium**:

“Second, the market has recognized the risks posed by highly concentrated production and spare capacity, which will likely lead to structurally higher strategic reserves and higher long-dated forward prices.”

The report argues that the “largest oil supply shock in history” will force policymakers and markets to reprice risks: the extreme concentration of production and idle capacity in the Middle East, combined with fragile energy infrastructure, will drive greater strategic reserve restocking and a higher “security premium” in forward prices. The report defines spare capacity as production that can come online within 30 days and be sustained for at least 90 days.

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## Two Extreme Scenarios: Prices Could Break $147 Record

Goldman Sachs detailed two “upside deviation” risk scenarios in the report, under which a 10-week Strait of Hormuz disruption would push global oil prices into uncharted territory.

“In both risk scenarios, daily Brent crude prices would likely exceed the 2008 historical record of $147 per barrel.”

### Adverse Scenario

Middle Eastern supply gradually recovers after the Strait reopens. Brent could average $140 per barrel in April. Prices would then converge to $100 per barrel by Q4 2026 and $90 per barrel by Q4 2027 as supply and demand respond to elevated levels.

### Severe Adverse Scenario

A persistent loss of 2 million barrels per day (bpd) in Middle Eastern production capacity (“production scarring”). Drawing on the five largest supply shocks of the past 50 years, affected nations typically see a 42% average production hit four years later. Context: Iran and seven other Persian Gulf nations accounted for 30% of global crude output in 2025. In this scenario, Brent surges sharply before converging to $115 per barrel by Q4 2026 and $100 per barrel by Q4 2027.

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## Higher Prices for Longer

Goldman Sachs emphasized that even if the Strait eventually reopens, prices will not quickly fall back to pre-war levels. The bank raised its 2026 Brent average forecast to $85 per barrel (from $77) and WTI to $79 per barrel (from $72).

The report stressed this is the largest oil supply shock on record. To date, the estimated gap in Persian Gulf crude exports stands at 17.6 million bpd. This extreme risk will force policymakers and markets to reevaluate the dangers of highly concentrated Middle Eastern capacity.

“The shock is so large that policy tools cannot fully offset it during or after the disruption. We expect policymakers to rebuild higher strategic reserve levels after the Strait reopens, and markets will price in a security premium in forward curves.”

Goldman Sachs cited three reasons for “higher for longer” prices:

1. **Massive inventory deficit**: Global commercial oil inventories are projected to face a net loss of ~510 million barrels by Q4 2026.

2. **Strategic reserve rebuilding**: Policymakers will mandate replenishment of Strategic Petroleum Reserves (SPR) for energy security after the Strait reopens, creating persistent incremental demand.

3. **Forward curve lift**: Recognizing energy infrastructure fragility, markets will price in a ~$4 per barrel “security premium” into forward prices.

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## Downside Risk: U.S. Export Restrictions

While highlighting upside risks, Goldman Sachs also noted potential downward pressures. If the U.S. government halts military operations at any time, the risk premium would quickly fade. Additionally, though not the base case, the bank does not rule out the possibility of U.S. oil export restrictions.

The report analyzed that while Trump administration officials have stated no plans to restrict energy exports, the executive branch has authority under the **International Emergency Economic Powers Act (IEEPA)** to implement such measures.

If the U.S. restricts crude and petroleum product exports, the WTI–Brent spread would widen further. Domestic refinery costs may not fall with lower domestic oil prices; instead, diesel inventory gluts could lead to refinery cuts, ultimately pushing U.S. retail gasoline prices higher.

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The above content is from Zhuifeng Trading Desk.

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