Goldman Sachs' "Contrarian Bullish" Logic: The Strait of Hormuz will resume circulation in 5 days, 70% recovery within two weeks, and 100% recovery after four weeks.

Global markets are volatile, but Goldman Sachs remains bullish, viewing recent market corrections as buying opportunities rather than the start of a long-term bear market. This optimism is based on the institution’s positive outlook for the “recovery” of circulation around the Strait of Hormuz.

Previously reported by Wallstreetcn, Goldman Sachs’ strategy team led by Peter Oppenheimer stated in a Wednesday report that, despite significant resistance from risks such as Middle East conflicts and disruptive AI impacts, the resilience of economic fundamentals and strong corporate earnings growth will limit the depth and duration of this correction.

Goldman Sachs’ optimism about the global markets largely hinges on expectations that the energy supply chain will recover quickly.

Daan Struyven, Goldman Sachs’ chief oil strategist, predicts that oil transportation through the Strait of Hormuz will remain at very low levels for the next five days, then recover to 70% of normal capacity within two weeks, and reach full normalization at 100% in about four weeks.

Path to Strait Flow Recovery and Storage Pressure

Goldman Sachs has set a specific timeline for the recovery of flow through the Strait of Hormuz. The bank assumes that oil exports will stay at current levels (about 15% of normal) for an additional five days, then gradually recover to 70% over the next two weeks, and reach 100% in the following two weeks.

In the context of export disruptions, Middle Eastern oil-producing countries face severe storage pressures. Goldman estimates that available onshore crude storage in Saudi Arabia, the UAE, Iraq, Kuwait, Qatar, and Iran totals about 600 million barrels, while pre-disruption idle capacity was just over 300 million barrels. In a complete shutdown scenario, this idle capacity can only hold about 23 days’ worth of “stranded” oil.

The report emphasizes that even if the Strait’s exports decline by only 85%, substantial production cuts will occur before the 23-day mark. As oil inventories approach storage limits, production will be forced to gradually decrease. Countries with smaller storage buffers, like Iraq, will face system congestion earlier and will be among the first to cut output.

Supply and Demand Expectations Push Oil Prices Higher in Q2

Several investment banks that previously held a pessimistic view on oil prices due to “structural oversupply” have recently raised their target prices. Daan Struyven also noted in the latest report that the market is digesting mixed signals; the gradual recovery of flow through the Strait may provide some relief, but increasing evidence of production cuts has reignited concerns.

Based on these assessments, Goldman Sachs has raised its Q2 Brent crude oil price forecast by $10 to $76 per barrel, and its WTI forecast by $9 to $71 per barrel.

The report states that the upward revisions are mainly due to two reasons: first, restricted Strait exports will lead to a significant drawdown in OECD commercial inventories, with March estimates indicating a reduction of 200 million barrels of Middle Eastern crude; second, persistent geopolitical uncertainties will continue to support risk premiums.

Long-term Price Reversion and Dual Risks

Although short-term oil prices are strongly supported, Goldman Sachs’s adjustments to long-term prices are relatively limited.

The bank raised its Q4 2026 Brent forecast from $60 to $66, and its 2027 forecast from $65 to $70. Goldman expects that as disruptions fade, the market will return to a surplus state, with spot Brent prices falling from the current $82 to $66 in Q4 2026. This decline reflects the gradual unwinding of the $13 risk premium and a $3 decrease in fair value.

Goldman Sachs warns that current price forecasts still carry significant upside risk. For example, if flow through the Strait remains low for an additional five weeks, Brent prices could reach $100 to prevent inventory levels from falling to critical points through large-scale demand destruction.

However, downside risks should not be overlooked. Market analysis suggests that if Trump’s escort plans or diplomatic efforts succeed, prompting a faster recovery of flow through the Strait, the current risk premium could evaporate quickly. Once vessel traffic resumes, Brent prices could plummet by $12 to $15.

Risk Warnings and Disclaimer

Market risks are present; investments should be cautious. This article does not constitute personal investment advice and does not consider individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions herein are suitable for their particular circumstances. Invest at your own risk.