Raise oil price expectations again! Goldman Sachs’ latest assessment: High oil prices will persist for a longer time, and oil prices will reach historic highs under two scenarios.

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As the Middle East conflict enters its fourth week, spot Brent and WTI crude oil prices have surged to $112 and $98, respectively. Based on the prolonged supply disruption cycle and a reshaping of the global energy security logic, Goldman Sachs has comprehensively raised its oil price forecasts for this and next year, warning that in extreme scenarios, oil prices could set a new record—$147.

According to Wind Trading Desk, Goldman Sachs analyst Daan Struyven and his team released the latest crude oil market report, pointing out that due to the ongoing geopolitical conflict in the Persian Gulf, the disruption of shipping through the Strait of Hormuz is more serious than expected, and the market is facing a repricing of structural supply risks.

The bank expects that, in March and April this year, the average price of Brent crude oil will reach $110 (previously expected at $98), up 62% from the full-year average in 2025. Meanwhile, the full-year average Brent price forecast for 2026 has been raised to $85, and the average for 2027 is maintained at the high level of $80.

Core Logic: Extending the “Shipping Halt” Assumption from 3 Weeks to 6 Weeks+Structural Security Premium

The analysts directly stated in the report that the most direct reason for raising the price forecast is the revision in expectations regarding Strait of Hormuz (SoH) flow.

“First, we now assume that the flow through the Strait of Hormuz will be maintained at only 5% of normal levels for up to 6 weeks (previously the bank expected 10% for 3 weeks), followed by a slow recovery period lasting 1 month.”

There are three theoretical paths for the recovery of SoH flows: Iran allows partial safe passage, de-escalation of the conflict, and military escort.

However, the analysts emphasize that uncertainty remains high, but their “6-week” setting is between two extremes: On one hand, U.S. policymakers have mentioned that military actions might last 4–6 weeks; on the other, prediction markets reflect the expected median duration of the conflict. The report cites prediction market probabilities: probability of the conflict ending by April 15 is 24%, by April 30 is 39%, and by May 15 is 50%.

Besides the longer interruption assumption, another core logic in the report is—the structural security premium:

“Second, the market has recognized the risks posed by highly concentrated production and spare capacity, making it highly likely that there will be structurally higher strategic reserves and long-term forward price increases.”

The report believes the “largest oil supply shock” will force policymakers and the market to reprice: the high concentration of production and idle capacity in the Middle East, and the vulnerability of energy infrastructure, will lead to higher future strategic stockpiling and a “security premium” for forward prices. The report also defines idle capacity: production that can be brought online within 30 days and sustained for at least 90 days.

Two Extreme Scenarios: Oil Prices May Break the $147 Record

Goldman assesses in detail two “upside deviation” risk scenarios in the report, that is, if the Strait of Hormuz disruption extends to 10 weeks, global oil prices will enter uncharted territory.

“In both of these risk scenarios, the daily price of Brent crude is likely to surpass the historical record of $147 set in 2008.”

In the "adverse scenario," Middle Eastern supplies gradually recover after the reopening of the strait, with Brent oil’s average price possibly reaching $140 in April. As supply and demand respond to high prices, the price would converge to $100 in Q4 2026, and $90 in Q4 2027.

In the "severely adverse scenario," if the Middle East production suffers a persistent loss of 2 million barrels/day (a “production scar”), referring to the five largest supply shocks in the past 50 years, it is estimated that affected countries suffered on average a 42% hit to output four years later; providing context: Iran and seven other Persian Gulf countries in 2025 would account for 30% of global crude production. In this scenario, Brent would spike at first, then converge to $115 in Q4 2026, and $100 in Q4 2027.

High Oil Prices Will Persist for Longer

Goldman emphasizes that even if the Strait eventually reopens, oil prices will not quickly fall back to pre-war levels. Goldman has raised its average Brent forecast for 2026 to $85/barrel (previously $77), and WTI’s average to $79/barrel (previously $72).

The report emphasizes this is the largest oil supply shock in history. As of now, the estimated gap in Persian Gulf crude exports has reached 17.6 million barrels/day. This extreme risk will force policymakers and the market to reassess the risks of such a high concentration of capacity in the Middle East.

“The magnitude of this shock is so significant that policy tools will find it hard to fully offset, both during and after the disruption. We expect policymakers to rebuild higher strategic reserves once the strait is reopened, and the market will factor security premiums into forward prices.”

According to Goldman, the reason oil prices will be “higher for longer” is:

1. Huge inventory shortfall: By Q4 2026, global commercial oil inventories are expected to face a net loss of about 510 million barrels.
2. Rebuilding strategic reserves: Policymakers in various countries will be forced to rebuild strategic petroleum reserves (SPR) for energy security after the strait reopens, forming long-term additional demand.
3. Rising forward curve: Due to awareness of infrastructure vulnerability, the market will price in a “security premium” of about $4 for forward contracts.

Downside Risk for Oil Prices: U.S. Export Restrictions

While highlighting upside risks, Goldman also points out potential downside factors. If the U.S. government ceases military operations at any time, the risk premium will quickly recede. In addition, although not the base case, Goldman does not rule out the possibility of the U.S. imposing restrictions on oil exports.

The report analyzes that although Trump administration officials indicate no immediate plan to restrict energy exports, under the International Emergency Economic Powers Act (IEEPA), the executive has the power to do so.

If the U.S. restricts crude and refined product exports, the price gap between WTI and the global benchmark (Brent) would widen further. Local refinery costs would not necessarily fall with domestic oil prices; in fact, refinery production may drop due to diesel inventory build-up, potentially pushing up U.S. domestic gasoline prices in the end.

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The above content is from Wind Trading Desk.

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