Goldman Sachs stated on Thursday that risks to oil prices remain skewed to the upside, both in the short term and through 2027. The bank added that the persistence of past major supply shocks highlights the possibility that oil prices could remain above $100 per barrel. On Thursday, Iran attacked energy facilities across the Middle East in retaliation for an Israeli strike on its South Pars gas field, causing the benchmark Brent crude price to surge above $119 per barrel. This marks a significant escalation in the three-week-long conflict, which has already led to widespread shutdowns of operations in Gulf countries.
Goldman Sachs indicated that its base case forecast assumes a gradual recovery in oil supply starting in April, with Brent crude prices expected to retreat to around $70 per barrel by the fourth quarter of 2026. However, the bank warned that the long-term outlook faces substantial risks due to the Iran conflict and uncertainty over when the Strait of Hormuz will reopen.
The bank noted that if production capacity is damaged, supply constraints could persist for an extended period. Conversely, if OPEC deploys its spare capacity once supply recovers, output could increase. Goldman Sachs described a disruption related to the Strait of Hormuz as potentially the largest in history and analyzed the persistence of production losses during the five biggest supply disruption events over the past 50 years.
While the base scenario assumes oil production will normalize within four weeks after a full reopening, the bank emphasized that long-term supply faces significant downside risks, particularly from Iran and offshore oil production. In the short term, Goldman Sachs stated that oil prices are likely to continue rising as long as shipments through the Strait of Hormuz remain restricted.
The bank also pointed out that if disruption risks persist, Brent crude prices could exceed the peak level seen in 2008, when it reached a record high of $147.5 per barrel. Additionally, Goldman Sachs suggested that the price spread between Brent and WTI crude could widen further if expectations of U.S. export restrictions increase.
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