Brent crude could rally to more than $120 a barrel by the fourth quarter if disruptions to flows through the Strait of Hormuz persist, according to Goldman Sachs Group Inc., although that’s not the bank’s base case.
“Escalation in the Middle East and the decline in estimated Persian Gulf flows to below 45% of pre-war levels have pushed oil prices back up,” analysts including Daan Struyven said in a July 20 note.
At present, Goldman sees Brent at $80 a barrel in the fourth quarter, and $75 next year, predicated on a de-escalation of tensions in the Middle East. Still, the risks to the forecasts are “tilted to the upside” given shipping disruptions in Hormuz, as well as potentially in the Red Sea, the analysts said.
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Global energy markets have been jolted this month — with Brent surging back above $91 a barrel — on renewed fighting between the US and Iran, as well as a threat by Tehran-backed Houthi rebels in Yemen to blockade shipments from Saudi Arabia. Those flows via the Red Sea have been critical in allowing disrupted Persian Gulf crude cargoes to reach customers.
While lower global inventories in the second quarter have left the oil market more exposed to supply shocks, a slump in Chinese imports coupled with greater demand elasticity may limit expected gains, they said.
For investors seeking to hedge persistent geopolitical shocks from the Middle East, as well as from Russia, Goldman suggested a strategy of going long on the December 2026 to March 2027 European diesel timespread.
Diesel markets were very tight before the war, Ukraine was continuing to hit Russian refineries, and there were extra risks to supplies from hurricanes, extreme summer heat, and deferrals in plant maintenance, they said.
Brent futures were last at $88.65 a barrel. They peaked above $126 a barrel in late April, during the initial phase of the US-Iran conflict.
