Goldman Sachs Group Inc. has substantially revised its oil price projections for 2026, citing what it describes as the most significant supply shock ever recorded in global crude markets. The disruption stems from prolonged constraints on flows through the critical Strait of Hormuz, a vital maritime passage connecting the Persian Gulf to international markets.
Revised Price Forecasts for Brent and WTI
In a recent analyst note dated March 22, Goldman Sachs economists, including Daan Struyven, announced that Brent crude is now expected to average US$85 per barrel in 2026. This represents a notable increase from the previous forecast of US$77 per barrel. Similarly, the full-year outlook for West Texas Intermediate (WTI) has been elevated to US$79 per barrel, up from an earlier projection of US$72.
Assumptions Behind the Forecast Revisions
The revisions are based on specific assumptions regarding the Strait of Hormuz situation. Goldman Sachs anticipates that flows through this strategic chokepoint will remain at only five percent of normal levels for a duration of six weeks. This period is expected to be followed by a one-month recovery phase. Over time, the bank estimates that these disruptions will result in cumulative losses exceeding 800 million barrels of oil.
Geopolitical Context and Market Turmoil
Energy markets have been thrown into disarray by the ongoing US-Israeli conflict with Iran, which has now entered its fourth week with no immediate resolution in sight. United States President Donald Trump recently issued a two-day ultimatum to Iran, demanding the reopening of the Strait of Hormuz under threat of bombing Iranian power plants. Tehran has responded with threats of reprisals, further escalating tensions.
International Energy Agency's Assessment
Echoing Goldman Sachs' grave assessment, International Energy Agency Executive Director Fatih Birol emphasized the severity of the current disruptions during a media event in Canberra, Australia. Birol stated that the impact is equivalent to combining the two major oil crises of the 1970s with the 2022 natural gas crisis triggered by Russia's invasion of Ukraine. "All put together," he remarked, highlighting the unprecedented nature of the supply shock.
Structural Risks and Market Implications
Goldman Sachs analysts warned that this historic supply shock will likely compel policymakers and markets to recognize structural vulnerabilities within the global energy landscape. They pointed to the high concentration of production and spare capacity in the Middle East, along with the inherent fragility of energy infrastructure, as critical risk factors.
The analysts projected that crude-production losses in the Middle East could escalate from the current 11 million barrels per day to a peak of 17 million barrels per day. This assumes a gradual four-week recovery period following a full reopening of the Strait of Hormuz. Presently, while the supply shock is causing tightness in Asian markets, commercial crude inventories in American and European OECD nations continue to rise. This is attributed to global supply exceeding demand prior to the outbreak of hostilities.
Additional Forecast Adjustments
In a related development, Goldman Sachs has also upwardly revised its natural gas price forecasts, reflecting broader energy market uncertainties. The bank's comprehensive analysis underscores the far-reaching implications of the current geopolitical strife on global energy dynamics.
