The Hormuz crisis remains ongoing, so why aren't oil prices rising? Goldman Sachs provides an answer.

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The Strait of Hormuz has been blocked for several months, but international oil prices have fallen rather than risen. The latest research report from Goldman Sachs reveals the logic behind this anomaly: a sudden collapse in demand is offsetting the upward pressure caused by supply shocks.

According to Daan Struyven, a commodities strategist at Goldman Sachs, in the latest weekly oil market report, Brent crude spot futures have fallen by a total of 22% since their late March peak, despite oil flows through the Strait of Hormuz remaining extremely limited.

He attributes this divergence to two major demand-side drivers: the reversal of previous hoarding demand and the greater-than-expected shrinkage in actual end-user demand. At the same time, high inventory buffers, rapid releases from strategic petroleum reserves, and better-than-expected supply from the Americas have collectively worked to suppress prices.

Goldman Sachs currently maintains its forecast for Brent crude at $90 per barrel in the fourth quarter of 2026, but clearly points out that price risks can go in both directions—if Middle Eastern supply losses last longer than anticipated, oil prices have significant upside; if demand continues to weaken, there is a downside risk of about $10 per barrel.

Hoarding Demand Subsides, Market Sentiment Reverses

The report points out that the market’s intense fear of an escalation in March once fueled large-scale financial and physical restocking, with retail fuel sales surging in multiple economies.

However, as expectations for a long-term ceasefire have become more optimistic, this logic has fundamentally reversed. Investor long positions have steadily declined, physical destocking is accelerating, and the market is pricing in a potential reopening of the Strait of Hormuz ahead of time.

This means the “panic restocking” premium that previously supported oil prices is systematically fading, becoming the first major force weighing on prices.

Demand Destruction Exceeds Expectations, Aviation and Petrochemical Suffer First

The second source of pressure is more structural: the drop in actual end-user demand has been greater than anticipated, and several institutions have lowered their demand forecasts for early 2026.

Demand destruction has been most pronounced in the highest-priced refined products. Goldman Sachs’ real-time global jet fuel demand tracking shows May demand was 6% below trend, equivalent to about 400,000 barrels per day. Shrinkage in petrochemical feedstock demand is also notable—Asia’s ethylene plant operating rates have fallen 14 percentage points since February, while India’s naphtha and LPG demand in April was down nearly 150,000 barrels per day year on year.

Road fuel demand is more varied: U.S. and Indian demand remains relatively robust, but Western Europe’s retail fuel sales fell by an average of 8% year on year in April, with the largest drop reaching 600,000 barrels per day.

Demand Is More Sensitive to Prices, Structural Factors Accelerate Transmission

The outsized demand response in this cycle is driven by two potential factors.

First are structural changes: the prevalence of electric vehicles and the expansion of urban public transport systems, along with the maturity of remote work technologies, have significantly improved consumers’ and businesses’ ability to substitute energy sources, reducing rigid dependence on traditional fuels.

Second is expectations management: the widespread market belief that this supply shock is "likely temporary" has led to deferments, rather than cancellations, in aviation travel and petrochemical production, and remote work policies in some regions of Asia have further suppressed travel demand. The combination of these two factors amplifies the suppressive effect of price signals on demand.

Strategic Reserves Provide Buffer, Return to the Market Could Trigger Reversal

Rory Green, an analyst at research firm TS Lombard, explored the deeper reason why oil prices have not broken $200 per barrel, focusing on the buffer provided by global strategic reserves.

Green points out that large-scale commercial refined product inventories have allowed industrial production to continue running even as crude imports have fallen sharply, creating a relatively moderate form of demand substitution. He also emphasizes that the rapid energy transition and continued accumulation of strategic crude reserves have given relevant economies a much greater buffer against this oil price shock compared to 2022—at that time, crude imports had surged after the outbreak of the Russia-Ukraine conflict.

However, Green also warns of a risk that should not be overlooked: Once the Strait of Hormuz reopens, large-scale rebuilding of strategic reserves will become a core national security priority, and a rapid rebound in industrial capacity utilization could drive a demand recovery. At that point, the forces suppressing global oil prices could swiftly turn into new drivers pushing prices higher, effectively supporting the floor for global benchmark oil prices.

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