Goldman Sachs has overturned its previous optimistic outlook, noting that traffic through the Strait of Hormuz has dropped by over 90%, a situation worse than initially assumed. Alternative pipeline redirections have reached only 0.9 million barrels per day (mb/d), far below theoretical capacity, indicating an unprecedented supply shock. The risk of oil prices moving higher is "rapidly expanding." If no signs of recovery emerge this week, prices could surpass $100 per barrel next week. Should the disruption continue through March, oil prices may exceed the historical peaks seen in 2008 and 2022.
On March 7, according to trading desk sources, Goldman Sachs' commodities research team effectively reversed its earlier optimistic projections in a March 6 oil report. The bank's previous baseline scenario had assumed that traffic through the Strait of Hormuz would "begin gradually normalizing within the next few days." A prior report by Goldman Sachs Chief Oil Strategist Daan Struyven on March 4 had projected that disrupted crude shipments through the strait would remain at very low levels for an additional five days, recover to 70% of normal capacity within two weeks, and return to full normalcy after four weeks.
However, the latest data reveals a much more severe reality. Goldman Sachs clearly stated in its recent report that it would promptly revise its oil price forecasts if no signs of normalization in strait traffic appear in the coming days. More critically, the report highlighted that upside risks are "rapidly expanding" and provided specific price projections under extreme scenarios: if no resolution is seen this week, oil prices could break above $100 per barrel next week; if traffic remains depressed throughout March, oil prices, particularly for refined products, could exceed the historical peaks of 2008 and 2022.
The report emphasized that upside risks for energy assets are accumulating at an unprecedented pace, with four key reasons undermining the foundation of the earlier "rapid recovery" assumption.
Reason one: The decline in strait traffic has far exceeded expectations, with reality being worse than assumed. Goldman Sachs estimates normal oil flow through the Strait of Hormuz at approximately 20 million barrels per day (mb/d), including about 14 mb/d of crude and condensate, 4 mb/d of refined products, and 2 mb/d of natural gas liquids (NGL). Current data is alarming: daily traffic through the strait has fallen by about 90% compared to normal levels, a reduction of roughly 18 mb/d. This figure is below the bank's baseline assumption of an 85% decline (approximately 15% of normal flow). In other words, the actual situation is worse than Goldman's pessimistic scenario, indicating that risks are skewed toward lower flows persisting for longer.
Reason two: Alternative pipeline rerouting capacity is severely insufficient, with actual redirection at only 0.9 mb/d. In response to the strait blockage, the market had hoped that pipelines and alternative ports could弥补 the gap. Theoretically, Saudi Arabia's East-West Pipeline (to Yanbu port on the Red Sea) and the UAE's Habshan-Fujairah pipeline (to the Gulf of Oman) have a combined estimated spare capacity of less than 3.6 mb/d. However, Goldman's actual tracking data shows that over the past four days, net rerouted flows via pipelines and the ports of Yanbu and Fujairah have increased by only about 0.9 mb/d, well below the theoretical maximum. This significant shortfall is due to multiple factors: attacks this week on Fujairah port and oil storage facilities directly impacted alternative export capacity; local shortages of marine fuel (typically imported via the Strait of Hormuz from the Persian Gulf) have hindered tanker operations; and previous pipeline attacks have further reduced rerouting potential. This suggests that market expectations of "pipeline backup" were severely overestimated, with actual缓冲 capacity being extremely limited.
Reason three: A rapid solution is not necessarily imminent, with shipping operators adopting a wait-and-see approach. Goldman's communication with market participants revealed that most shipowners are currently in "观望 mode," primarily because physical risks within the strait remain extremely high. Notably, Goldman's analysis dismissed "insurance costs" as the main reason for the traffic plunge. Data indicates that some insurance remains available, and from a purely economic perspective, voyages through the strait are still profitable given the significant surge in freight rates—even though war risk premiums have risen substantially (currently around 3%, compared to a historical peak of 7.5% during the Iran-Iraq war in the 1980s). This finding points to a more concerning conclusion: the core factor preventing vessel passage is physical security risk, not economic cost. As long as the physical risk persists, strong economic incentives alone cannot restore traffic.
Goldman outlined three potential paths for the restoration of strait traffic: an overall de-escalation of the conflict (comprehensive ceasefire or diplomatic resolution); the U.S. providing strong convoy protection for tankers; or Iran allowing safe passage for tankers from specific origins/destinations (including China). Judging by各方 statements, expectations for the conflict's duration range from 10 days to over a month, with significant divergence further加剧 market uncertainty.
Reason four: The scale of the supply shock is unprecedented, and demand destruction pricing will occur faster than in the past. Goldman emphasized that the magnitude of this supply shock has no historical precedent. The total disruption to Persian Gulf oil supply has reached 17.1 mb/d—17 times the peak decline in Russian production in April 2022. Meanwhile, total oil exports from the Persian Gulf have fallen 74% from normal levels, to only about 6 mb/d. Goldman noted that due to the unprecedented scale of the shock, the market will begin pricing in "demand destruction" faster than historical experience or simple models would suggest, for two reasons: inventory drawdowns are extremely rapid—the larger the shock, the sooner the market prices in demand destruction while inventories are still relatively high, rather than waiting for them to bottom out; and accelerating factors叠加, such as consumer stockpiling and non-OECD countries cutting refined product exports (e.g., China has reduced fuel exports to ensure domestic supply), will further speed up the depletion of OECD inventories.
The essence of Goldman's report reversal: Baseline assumptions are being undermined by reality. The key to understanding this report lies in comparing it with Goldman's previous optimistic outlook. Previously, the bank's strategy team had taken a contrarian bullish stance amid market turbulence, viewing the pullback as a buying opportunity, with one core supporting logic being the optimistic expectation that the Strait of Hormuz would "return to normal within four weeks." Struyven's previously outlined path assumed traffic would remain at about 15% of normal for an additional five days, recover to 70% within two weeks, and reach 100% normalization after another two weeks. Based on this assumption, Goldman had raised its Q2 average price forecast for Brent crude to $76 per barrel and WTI to $71, while lifting its Q4 2026 Brent forecast from $60 to $66.
However, the March 6 report effectively represents Goldman publicly questioning its own assumptions with the latest data: actual traffic (about 10% of normal) is below the assumption (15%); alternative redirection (0.9 mb/d) is far below theoretical potential (3.6 mb/d); a rapid solution is not necessarily imminent; and the shock scale exceeds all historically comparable scenarios. Goldman explicitly stated that it would soon revise its oil price forecasts if evidence of gradual normalization in strait traffic does not appear in the coming days. This serves as a warning to the market: a more aggressive upward revision could be imminent.
Nevertheless, Goldman also noted in its prior report that if U.S. escort plans or diplomatic efforts prove effective and strait traffic recovers quickly, the current risk premium would rapidly evaporate, potentially leading to a sharp decline of $12 to $15 per barrel in Brent prices. According to the report, 12 tankers have been attacked in and around the Strait of Hormuz from March 1 to 6, with no confirmed attacks on Asian-flagged tankers recorded to date—a detail that could be a significant variable influencing the situation's trajectory.
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