Goldman "tears up report": If the Strait of Hormuz does not "recover as expected" in the next few days, the "significant upside risk" for oil prices will rapidly expand.

On March 7, according to the news from Zhui Feng Trading Desk, Goldman Sachs' commodities research team released the latest oil report on March 6, quietly "overturning" its previous optimistic expectations—the bank's previous base scenario was built on the assumption that the Hormuz Strait's flow would "gradually return to normal in the next few days." However, the latest data show that the reality is far more severe than anticipated.

Goldman Sachs clearly stated: If there are no signs of a normalization of the strait's flow in the next few days, it will immediately revise its oil price forecast. More critically, the report points out that upside risks are "rapidly expanding" and provides direct price judgments under extreme scenarios:

If there is no solution in sight this week, oil prices are likely to surpass $100 next week. If the strait’s flow remains sluggish throughout March, oil prices (especially refined products) will exceed the historical peaks of 2008 and 2022.

The report notes that upside risks for energy assets are accumulating at an unprecedented pace, and Goldman Sachs lists four main reasons, each undermining the foundation of the previous "rapid recovery" assumption.

Reason One: Strait flow decline far exceeds expectations, worse than assumed

Goldman Sachs estimates that the normal oil flow through the Strait of Hormuz is about 20 million barrels per day (20mb/d), including about 14 million barrels/day of crude oil and condensate, about 4 million barrels/day of refined products, and about 2 million barrels/day of liquefied natural gas (NGL).

Current actual data is shocking: The daily flow through the strait has dropped by about 90% from normal, a decrease of about 18 million barrels/day (18mb/d).

This figure is lower than the "85% decline (about 15% of normal)" preset in Goldman’s base assumption for this week. In other words, the reality is even worse than Goldman’s pessimistic assumption, meaning risks around the base scenario are now skewing toward "even lower flows, for even longer."

Reason Two: Serious insufficiency in rerouting pipeline capacity, actual redirection only 0.9mb/d

Facing strait blockage, the market hoped that pipelines and alternative ports could fill the gap. In theory, Saudi Arabia's east-west pipeline (to Yanbu port on the Red Sea) and the UAE's Habshan-Fujairah pipeline (to Gulf of Oman) have a combined estimated backup capacity of less than 4 million barrels/day (3.6mb/d).

However, Goldman’s actual tracking data shows that over the past four days, the net redirected flow through pipelines and Yanbu Port (Saudi, Red Sea) and Fujairah Port (UAE, Oman Gulf) only increased by about 0.9 million barrels/day (0.9mb/d), far below the theoretical maximum.

The reasons for this gap are multiple:

This week’s attacks on Fujairah port and oil storage facilities directly hit alternative export capacity;Local shortage of marine fuel (which usually comes through the Strait of Hormuz from the Persian Gulf), preventing normal tanker operations;Previous attacks on pipelines further reduced redirection potential.

This means market expectations for pipelines to serve as a fallback are seriously overestimated, and actual buffer capacity is extremely limited.

Reason Three: Fast solutions are not necessarily imminent, shipping businesses are in wait-and-see mode

Goldman Sachs found through communication with market participants that most shipowners are currently in a "wait-and-see" mode, mainly because physical risks remain extremely high in the strait.

It is noteworthy that Goldman’s analysis excluded "insurance cost" as the main cause for the sharp decline of flow. Data show, some insurance is still available, and from a purely economic perspective, crossing the strait is still profitable given the sharply rising freight rates—even though war insurance premiums have soared (now about 3%, historical high was 7.5% during the Iran-Iraq war in the 1980s).

This finding points to a more worrying conclusion: The core factor preventing ships from passing is physical safety risk, not economic cost. As long as physical risks are not eliminated, economic incentives alone cannot push for flow resumption.

Goldman listed three possible paths for resuming the strait’s flow:

Overall de-escalation of conflict (full ceasefire or diplomatic solution);Strong US escort protection for oil tankers;Iran allows oil tankers bound for specific sources/destinations (including China) to safely transit.

Judging from statements by all sides (see table below), expectations for how long the conflict will last range from 10 days to more than a month, major divergences exist, further adding to market uncertainty:

Reason Four: Size of supply shock is unprecedented, demand destruction pricing will come faster than history

Goldman emphasizes that the scale of this supply shock has no precedent in history.

Total shock to Persian Gulf oil supply has reached 17.1 million barrels per day (17.1mb/d)—this figure is 17 times the peak decline in Russian output in April 2022. Meanwhile, Persian Gulf oil exports have now dropped 74% from normal levels, to only about 6 million barrels per day.

Goldman notes, given the unprecedented scale, the market will start pricing "demand destruction" faster than historical experience and models suggest, for two reasons:

Inventory depletion speed is extremely fast: the bigger the shock, the sooner the market will price in demand destruction while inventories are still relatively high, rather than waiting for them to hit bottom;Accelerating factors accumulate: consumer hoarding, and non-OECD countries cutting refined product exports (China has already cut exports to ensure domestic supply), will further accelerate OECD inventory depletion.

The essence of Goldman "tearing up the report": Base assumptions are being shattered by reality

The key to understanding this report is to compare it with Goldman Sachs’ previous optimistic expectations.

According to previous articles by Wallstreetcn, Goldman’s strategy team was previously bullish against market turbulence, viewing the pullback as a buying opportunity. One of the core supporting logics was the optimistic expectation that the Strait of Hormuz would "return to normal in four weeks." Goldman’s chief oil strategist Daan Struyven’s previous roadmap set the flow to remain at about 15% of normal for 5 more days, recovering to 70% in two weeks, and then to 100% in two more weeks.

Based on this assumption, Goldman raised the Q2 Brent crude average price forecast to $76/barrel, WTI to $71/barrel, and increased Brent’s Q4 2026 forecast from $60 to $66.

However, the March 6 report is actually Goldman publicly questioning its own assumptions based on latest data:

Actual flow (about 10% of normal) is below the assumption (15%);Alternative redirection (0.9mb/d) is far below theoretical capacity (3.6mb/d);Quick solutions are not necessarily imminent;The shock size is beyond anything comparable in history.

Goldman Sachs clearly stated that if there is no evidence of gradually normalizing flow in the strait in the coming days, it will soon revise its oil price forecast. This is in effect warning the market: a more aggressive upward revision may be issued at any time.

However, Goldman also points out that if the US escort plan or diplomatic efforts succeed and strait flow recovers quickly, the current risk premium will evaporate rapidly, and Brent prices could fall sharply by $12 to $15 per barrel.

The report says that, currently, 12 oil tankers have been attacked in the Strait of Hormuz and surrounding waters (March 1–6), and so far, no confirmed attacks on Asian-flagged oil tankers have been recorded—this detail may be an important variable affecting the situation’s trajectory.

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The above content comes from Zhui Feng Trading Desk.

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