Goldman Sachs warns that Brent crude could rise above $120 if geopolitical tensions block the Strait of Hormuz. While its base case predicts prices at $80, ongoing conflicts have already lifted Brent above $91. Investors are tracking how these supply chain disruptions affect global energy costs and diesel market stability.
Detailed Coverage
Analysts at Goldman Sachs have issued a note highlighting a significant risk factor for the global oil market: the potential for Brent crude to breach $120 per barrel by the fourth quarter of 2026. This projection is tied to the escalating geopolitical tensions in West Asia, which threaten the safety of critical oil shipping lanes, most notably the Strait of Hormuz. While this extreme scenario remains outside the firm's primary expectation, it highlights the fragility of global energy supply chains in the face of persistent conflict.
Impact of Shipping Disruptions and Conflict
The global energy market is currently under pressure from a marked decline in Persian Gulf oil flows, which have reportedly dropped below 45% of levels seen before the recent conflicts. Recent data shows that Brent crude has already climbed above $91 per barrel, driven by renewed tensions involving the United States and Iran, as well as threats from Houthi rebels regarding shipping routes. These disruptions are vital for the movement of crude oil from the Persian Gulf to international destinations, making any escalation a direct threat to global supply.
Base Case and Market Dynamics
Despite the potential for price spikes, the firm's base case forecast remains more conservative, projecting Brent crude at $80 per barrel for the final quarter of 2026 and $75 for the following year. This outlook assumes a gradual easing of regional tensions. However, investors should be aware that the market is more sensitive to supply shocks than in previous periods due to lower global inventory levels recorded during the second quarter of 2026.
Factors Influencing Price Volatility
Several factors act as a counterweight to potential price increases. A slowdown in oil imports by China, combined with higher demand elasticity, may help limit how high prices can climb even if supply is interrupted. Conversely, the diesel market remains notably tight. This tightness is attributed to a combination of factors including attacks on Russian refineries, the impact of extreme summer heat, and risks associated with hurricane season, which can disrupt production and refining operations. For those looking to understand the broader market reaction, the firm has pointed to the European diesel timespread for late 2026 and early 2027 as a key area to monitor, as these markets are already strained by the current geopolitical and environmental pressures. The main monitorable for investors moving forward will be any changes in the flow of oil through the Strait of Hormuz and the Red Sea, as these remain the primary drivers of potential volatility in global energy pricing.