Goldman Sachs Raises Oil Price Outlook Again! Latest Assessment: High oil prices will last longer, and in two scenarios, oil prices will reach new all-time highs.

Source: Wall Street Insights

As the Middle East conflict enters its fourth week, spot Brent and WTI crude oil prices have surged to $112 and $98 respectively. Due to the extended supply disruption cycle and the reshaping of global energy security logic, Goldman Sachs has significantly raised its oil price forecasts for this year and next, warning that in extreme scenarios, prices could hit a record high—$147.

According to reports from ChaseTrade, Goldman Sachs analyst Daan Struyven and his team released a new crude oil market report indicating that ongoing geopolitical tensions in the Persian Gulf have led to more severe shipping disruptions in the Strait of Hormuz than expected, causing the market to reprice structural supply risks.

The bank forecasts that the average Brent crude price will reach $110 in March and April (up from previous expectations of $98), representing a 62% increase over the full-year 2025 average. Additionally, the 2026 average price is raised to $85, with the 2027 average remaining high at $80.

Core Logic: 3 to 6 weeks of “shipping disruption” assumption + structural safety premium

Analysts directly state in the report that the main reason for the price increase is the correction of expectations regarding flow through the Strait of Hormuz (SoH).

“First, we now assume that the flow through the Strait of Hormuz will remain at only 5% of normal levels for up to 6 weeks (previously, we expected 10% for 3 weeks), followed by a slow recovery period of one month.”

There are three theoretical paths for the recovery of flow through the Strait of Hormuz: Iran allowing some ships to pass safely, de-escalation of conflict, or military escort.

However, analysts emphasize that uncertainty remains high, and their “6-week” assumption falls between two scenarios: one where U.S. policymakers mention military actions lasting 4-6 weeks, and another reflecting market expectations of conflict duration. The report cites market probability forecasts: a 24% chance the conflict ends before April 15, 39% before April 30, and 50% before May 15.

In addition to the longer disruption assumption, another core logic of the report is the presence of a structural safety premium:

“Second, the market recognizes the risks associated with highly concentrated production and spare capacity, which could lead to a structurally higher strategic reserve and long-term forward prices.”

The report suggests that the “largest supply shock in oil” will force policymakers and markets to reprice: the high concentration of production and idle capacity in the Middle East, coupled with fragile energy infrastructure, will lead to higher strategic reserves and a long-term “safety premium” in forward prices. The report also defines idle capacity as the ability to bring online within 30 days and sustain for at least 90 days.

Two extreme scenarios: oil prices could break the $147 record

Goldman Sachs details two “upward deviation” risk scenarios, where if the disruption in the Strait of Hormuz extends to 10 weeks, global oil prices could enter uncharted territory.

“In these two risk scenarios, Brent crude could surpass the record high of $147 set in 2008.”

In the “adverse scenario,” Middle Eastern supply gradually recovers after the Strait reopens, with Brent prices potentially reaching $140 in April. Subsequently, as supply and demand respond to high prices, prices are expected to converge to $100 by Q4 2026 and to $90 by Q4 2027.

In the “severely adverse scenario,” if there is a sustained loss of 2 million barrels per day in Middle Eastern production (a “production wound”), historical data from five of the largest supply shocks over the past 50 years suggest affected countries could see an average production decline of 42% after four years. Background: Iran and seven other Gulf countries together accounted for 30% of global oil output in 2025. Under this scenario, Brent prices would spike sharply initially, then converge to $115 in Q4 2026, and to $100 in Q4 2027.

Higher oil prices to last longer

Goldman Sachs emphasizes that even if the Strait eventually reopens, prices will not quickly return to pre-conflict levels. The firm has raised its 2026 Brent forecast to $85 per barrel (from $77), and WTI to $79 (from $72).

The report highlights that this is the largest oil supply shock in history. Currently, the estimated shortfall in Persian Gulf crude exports is 17.6 million barrels per day. This extreme risk will prompt policymakers and markets to reassess the risks of highly concentrated Middle Eastern capacity.

“The scale of this shock is so large that policy measures will struggle to fully offset it during and after the disruption. We expect policymakers to rebuild higher strategic reserves after the Strait reopens, and the market will incorporate a safety premium into long-term prices.”

Goldman Sachs believes the reasons for “longer and higher” prices include:

2. Massive inventory shortfall: by Q4 2026, global commercial oil inventories could face a net loss of about 510 million barrels.

3. Strategic reserve rebuilding: after the Strait reopens, policymakers will be compelled to replenish strategic reserves for energy security, creating long-term additional demand.

4. Upward shift in the forward curve: due to awareness of infrastructure fragility, markets will price in approximately $4 of “safety premium” into forward prices.

Downside risks to oil prices: US export restrictions

While highlighting upside risks, Goldman Sachs also points out potential downside factors. If the U.S. government halts military operations at any time, risk premiums could quickly decline. Additionally, although not a baseline scenario, Goldman does not rule out the possibility of the U.S. implementing oil export restrictions.

The report notes that despite statements from Trump administration officials about a temporary ban on energy exports, under the International Emergency Economic Powers Act (IEEPA), the executive branch has the authority to impose such restrictions.

If the U.S. restricts crude and refined product exports, the WTI price differential relative to the global benchmark (Brent) could widen further. Domestic refineries may not see lower costs despite falling domestic oil prices, and could instead face reduced output due to diesel inventory buildup, ultimately pushing up U.S. gasoline prices.