Brent crude prices could climb above USD 120 a barrel in the fourth quarter of 2026 if disruptions to oil flows through the Strait of Hormuz persist, according to a Goldman Sachs research note cited by Bloomberg. The investment bank, however, stressed that this represents a risk scenario, not its base-case forecast.
Goldman Sachs expects Brent crude to average around USD 80 a barrel in the fourth quarter of 2026 and USD 75 a barrel in 2027, assuming geopolitical tensions in West Asia ease. However, it warned that risks to the outlook remain skewed to the upside due to continued shipping disruptions in the Strait of Hormuz and the potential for further disruptions in the Red Sea.
Shipping Risks Keep Oil Markets On Edge
According to the report, escalating tensions in West Asia and a decline in estimated Persian Gulf oil flows to below 45 per cent of pre-war levels have driven oil prices higher. The bank noted that disruptions in the Red Sea have also become increasingly significant, as the route has been used to divert Persian Gulf crude cargoes to global markets.
Global oil markets have remained volatile amid renewed hostilities involving the United States and Iran, while Tehran-backed Houthi rebels in Yemen have threatened to disrupt shipments from Saudi Arabia. During the latest escalation, Brent crude briefly climbed above USD 91 a barrel.
Goldman Sachs said lower global oil inventories during the second quarter have left the market more vulnerable to supply shocks. However, it added that weaker crude imports by China and greater demand elasticity could help limit the magnitude of further price increases.
Diesel Supply Remains Tight
The bank also flagged tightening conditions in global diesel markets, noting that supplies were already constrained before the latest conflict. It cited continued Ukrainian attacks on Russian refineries, along with risks from hurricanes, extreme summer temperatures and delayed refinery maintenance, as additional factors tightening supply.
To hedge against persistent geopolitical risks in West Asia and Russia, Goldman Sachs recommended a long position in the December 2026–March 2027 European diesel timespread.
Brent crude futures were last trading at around USD 88.65 a barrel, well below the peak of more than USD 126 a barrel reached during the initial phase of the US-Iran conflict earlier this year. |
