Amidst global market turbulence, Goldman Sachs is adopting a contrarian bullish view, positing that the recent market pullback represents a buying opportunity rather than the start of a prolonged bear market. This stance is underpinned by the firm's optimistic expectation for a "four-week restoration" of traffic flow through the Strait of Hormuz.
The strategy team at Goldman Sachs, led by Peter Oppenheimer, wrote in a Wednesday report that although risk assets face "significant headwinds" from concerns sparked by the Middle East conflict and the disruptive impact of AI, the resilience of economic fundamentals and robust corporate earnings growth suggest the depth and duration of this correction will be limited.
A substantial part of Goldman Sachs' optimism for global markets is built upon expectations for a rapid repair of the energy supply chain.
Goldman's chief oil strategist, Daan Struyven, forecasts that obstructed crude oil shipments through the Strait of Hormuz will remain at their current severely low levels for the next five days. Subsequently, traffic is expected to recover to 70% of normal volume within two weeks, achieving a full 100% restoration to normalized levels after four weeks.
The bank has outlined a specific timeline for the resumption of traffic through the Strait. It assumes that oil exports via the Strait will hold at current levels for an additional five days, then gradually recover to 70% over the following two weeks, and reach 100% in the subsequent two weeks.
Against the backdrop of export disruptions, Middle Eastern oil producers are confronting significant storage pressures. Goldman estimates that the combined available onshore crude oil storage capacity for Saudi Arabia, the UAE, Iraq, Kuwait, Qatar, and Iran totals approximately 600 million barrels. Prior to the disruption, idle capacity was just over 300 million barrels. In a scenario of complete closure, this spare capacity could only accommodate about 23 days of "trapped" crude oil.
The report emphasizes that even with an 85% reduction in Strait exports, substantive production cuts would likely occur before the 23-day mark is reached. As crude inventory levels approach storage limits, production will be forced to gradually wind down. Countries with smaller storage buffers, such as Iraq, will face system congestion and be compelled to initiate output reductions at an earlier stage.
These supply and demand expectations are pushing second-quarter oil prices higher. Several investment banks, previously bearish on oil prices due to perceived "structural oversupply," have recently begun intensively raising their price targets. Daan Struyven also noted in the latest report that the market is digesting mixed signals; the potential for gradual Strait recovery offers some relief, but increasing evidence of production cuts is reigniting concerns.
Based on this assessment, Goldman Sachs has raised its average Brent crude price forecast for the second quarter by $10 to $76 per barrel, and its WTI forecast by $9 to $71 per barrel.
The report cites two primary reasons for the upward revision: first, the Strait export disruption will lead to a significant drawdown in OECD commercial inventories and is estimated to cause a 200-million-barrel reduction in Middle Eastern crude production for March; second, lingering geopolitical uncertainty will continue to support a risk premium.
Despite strong short-term price support, Goldman's adjustments to longer-term oil price forecasts are relatively modest. The bank raised its forecast for Brent crude in the fourth quarter of 2026 from $60 to $66 per barrel, and its 2027 forecast from $65 to $70. Goldman expects that as the disruption's impact fades, the market will return to an oversupplied state, with the Brent spot price declining from the current $82 to $66 by Q4 2026. This retreat reflects the gradual erosion of a $13 risk premium, coupled with a $3 decline in fair value.
Goldman cautions that risks to the current price forecast remain significantly skewed to the upside. For instance, if Strait flows remain low for an additional five weeks, Brent prices could touch $100 per barrel to prevent inventories from falling to critical levels through significant demand destruction.
However, downside risks are also noteworthy. Market analysis indicates that if former President Trump's escort plan or multi-party diplomatic efforts prove effective, leading to a faster-than-expected recovery in Strait traffic, the current risk premium could rapidly evaporate. Upon observing the resumption of vessel transit, Brent prices could face a sharp decline of $12 to $15.
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