Goldman Sachs' "contrarian bullish" logic: The Strait of Hormuz will reopen in 5 days, restore 70% of traffic within two weeks, and reach 100% in four weeks.

```

Amidst global market turbulence, Goldman Sachs is bullish against the trend, viewing the recent market pullback as a buying opportunity rather than the start of a prolonged bear market. This outlook is backed by the institution’s optimistic expectations for a "four-week recovery" of traffic through the Strait of Hormuz.

Previously reported by WallstreetCN, Goldman Sachs’ strategy team led by Peter Oppenheimer wrote in a Wednesday report that despite "significant headwinds" for risk assets stemming from concerns over the Middle East conflict and disruptive effects of AI, the resilience of economic fundamentals and robust corporate earnings growth mean the depth and duration of this correction will be limited.

Goldman Sachs' optimism about global markets is largely based on its expectation for a swift restoration of the energy supply chain.

Goldman Sachs’ Chief Oil Strategist Daan Struyven predicts that the hindered crude oil transport through the Strait of Hormuz will remain at its current low level for the next 5 days, then recover to 70% of normal volume within two weeks, and reach 100% normalization within four weeks.

Path to Recovery of Strait Traffic and Storage Pressure

Goldman Sachs has set a specific timetable for the recovery of traffic in the Strait of Hormuz. The bank assumes that the oil exports will stay at the current level (about 15% of normal) for an additional 5 days, then gradually recover to 70% in the next two weeks, and reach 100% in the following two weeks.

With exports disrupted, oil-producing countries in the Middle East are facing severe storage pressures. Goldman Sachs estimates that Saudi Arabia, UAE, Iraq, Kuwait, Qatar, and Iran have a total of about 600 million barrels of available onshore crude storage, while the idle capacity before the interruption was just over 300 million barrels. In the event of a complete shutdown, this idle capacity could only accommodate roughly 23 days’ worth of “trapped” crude oil.

The report emphasizes that even if strait exports drop by only 85%, substantial production cuts would occur before the 23-day deadline is reached. As crude stocks approach the storage limit, production will be forced to gradually decrease. Especially countries like Iraq, with a smaller storage buffer, will face system congestion and be the first to cut production earlier.

Supply and Demand Expectations Push Up Q2 Oil Prices

Previously, several investment banks held a pessimistic view of oil prices due to “structural oversupply”, but have recently begun to raise their target prices intensively. Daan Struyven also stated in his latest report that the market is digesting mixed signals—while gradual recovery of strait traffic offers some relief, increasing evidence of production cuts has reignited concerns.

Based on these assessments, Goldman Sachs raised its average Brent crude price forecast for the second quarter by $10 to $76 per barrel, and its WTI crude forecast by $9 to $71 per barrel.

The report notes that the forecast revisions are mainly based on two reasons: first, the disruption of strait exports will lead to a significant drop in OECD commercial inventories, and is expected to cause a 200 million barrel reduction in Middle Eastern crude production in March; second, persistent geopolitical uncertainties will continue to support risk premiums.

Long-Term Price Reversion and Bidirectional Risk

While oil prices are strongly supported in the short term, Goldman’s adjustments to longer-term forecasts are relatively limited.

The bank raised its Brent crude price forecast for Q4 2026 from $60 to $66, and for 2027 from $65 to $70. Goldman Sachs expects that as disruption effects fade, the market will return to oversupply, and Brent spot prices will drop from the current $82 to $66 in Q4 2026. This pullback reflects the fading of a $13 risk premium and a $3 decline in fair value.

Goldman Sachs cautions that the risk to current price forecasts remains significantly skewed to the upside. For example, if traffic through the Strait of Hormuz remains low for an additional 5 weeks, Brent prices could reach $100 per barrel, in order to prevent inventories from falling to critical levels through substantial demand destruction.

However, downside risks should not be ignored. Market analysis points out that if Trump’s convoy plan or various diplomatic efforts prove effective, prompting quicker-than-expected recovery of strait traffic, the current risk premium could evaporate quickly. Once vessel traffic resumes, Brent prices may face a sharp drop of $12 to $15.

Risk Disclosure and DisclaimerMarkets carry risks and investment requires caution. This article does not constitute personal investment advice, nor does it take into account individual users' specific investment objectives, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their particular circumstance. Invest accordingly, at your own risk. ```