Goldman Sachs' base case is Brent crude averaging $80 a barrel in the fourth quarter of 2026.
Oil prices could reach upward of $120 a barrel if tensions between the U.S. and Iran don't start to ease soon.
Analysts at Goldman Sachs, led by Daan Struyven, wrote in a note published on Monday night that Brent crude may surpass $120 a barrel by next quarter and average $100 a barrel the following year if the Strait of Hormuz remains disrupted throughout 2027. In this scenario, output from the Persian Gulf doesn't recover until December next year, with the support of oil-pipeline extensions.
Brent crude contracts for September delivery (BRN00) (BRNU26) declined nearly 1% on Tuesday to $88.45 a barrel, but that's up 22% since the start of the month, according to Dow Jones Market Data.
Although oil prices initially fell after Washington and Tehran signed the memorandum of understanding, which extended the cease-fire by 60 days, they climbed again once the two sides started striking each other once again - and now traffic through the key waterway is at a near standstill again. According to the New York-headquartered investment bank, flows from the Gulf have fallen to below 45% of pre-war levels.
Goldman's base case is Brent averaging $80 in the last quarter of this year and $75 in 2027 - assuming de-escalation before the end of the year. But the analysts wrote that they now see upside price risks, including disruptions to shipping in both the strait and possibly the Red Sea and damage to energy infrastructure from the wars in Iran as well as between Russia and Ukraine.
While visible oil stocks are down 300,000 barrels per day year-over-year, demand is less tight as the supply from the Middle East has become more adaptable to the effective closure of the route, the market has become more tolerant to lower inventories and appetite has grown for alternatives to oil, they said.
"The decline in crude import demand remains especially large for China," the analysts wrote, adding that the 4.7 million barrel a day year-over-year fall in crude imports by sea to China in June reflects weaker runs and demand for products like gasoline.
"In our view, China crude imports need not rebound immediately, especially if prices were to rise further, given still-elevated estimated China oil inventories of roughly 2 billion barrels and its ability to substitute some oil demand by coal and power," they said.
-Nora Redmond
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(END) Dow Jones Newswires
July 21, 2026 05:00 ET (09:00 GMT)
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