Goldman Sachs: Brent Crude Could Surpass $120 per Barrel in Q4 if Strait of Hormuz Disruptions Continue

Goldman Sachs has stated that Brent crude oil prices could surpass $120 per barrel in the fourth quarter of this year if shipping through the Strait of Hormuz continues to be disrupted. However, this scenario is not the bank's base case forecast.

The analyst team led by Daan Struyven at Goldman Sachs said, "Escalating tensions in the Middle East, along with estimated Persian Gulf oil exports having fallen below 45% of pre-war levels, are driving oil prices higher once again."

Goldman Sachs currently maintains its base case scenario, assuming a gradual de-escalation of tensions in the Middle East, forecasting an average Brent crude price of around $80 per barrel in the fourth quarter of 2024 and approximately $75 per barrel on average in 2027.

However, Struyven and his colleagues noted that the risks to this forecast are skewed to the upside, primarily due to continued disruptions in shipping through the Strait of Hormuz and potential impacts on Red Sea shipping routes.

Global energy markets have recently experienced renewed volatility. As tensions between the U.S. and Iran escalate, and Iran-backed Houthi movement in Yemen threatens to block cargo shipments from Saudi Arabia, Brent crude prices have climbed back above $91 per barrel.

In late April, during the initial phase of U.S.-Iran tensions, Brent crude prices briefly surged above $126 per barrel. At the time of writing, Brent crude futures were trading at $88.56 per barrel.

In the context of disrupted transportation in the Persian Gulf, crude oil shipped via the Red Sea has played a critical role over recent months.

Goldman Sachs pointed out that global crude oil inventories declined in the second quarter of this year, making oil markets more vulnerable to supply shocks. However, declining Chinese crude imports and increased sensitivity of demand to price changes could limit further sharp increases in oil prices.

For investors seeking to hedge against the ongoing escalation of geopolitical risks in the Middle East and Russia, Goldman Sachs recommends a strategy of going long on the European diesel futures price spread from December 2026 to March 2027.

Analysts noted that the diesel market was already tight before any potential U.S.-Iran war, and ongoing Ukrainian attacks on Russian refineries, combined with hurricanes, extreme heat, and delayed refinery maintenance, could further disrupt diesel supply.