Goldman Sachs has revised upward its crude oil price forecasts, saying a substantial near-term risk premium tied to potential Middle East supply disruptions will keep prices higher despite an ongoing recovery in regional output.
In the bank's updated outlook, strategists led by Daan Struyven raised the December 2026 Brent forecast to $105 a barrel from $90, and lifted the December 2026 West Texas Intermediate (WTI) projection to $94 from $81. The 2027 average forecasts were also nudged up - Brent was increased to $88 from $80, and WTI to $78 from $73.
Goldman attributes most of October's crude price rally to an expansion in the market's risk premium. The strategists estimate that the premium has jumped to roughly $27 a barrel and said that this increase "now explains most of October’s crude price rally," noting that spot Brent futures reached $118. They add that Brent's fair value was relatively unchanged in September and October, staying in the $90s, because global inventories - the model's primary driver - were broadly flat as output and consumption adapted.
The bank says the market has started to assign greater probability to escalation in the period after the Nov. 3 U.S. midterm elections. Goldman cites Polymarket-implied probabilities that show the chance the U.S.-Iran ceasefire ends due to escalation rising from 10% before the midterms to about 50% by Nov. 15 and roughly 75% by year-end.
Market participants, the strategists say, are concentrating on three potential U.S. or Israeli actions against Iran: strikes on underground nuclear facilities, strikes on missile sites near the Strait of Hormuz, and wider strikes on Iran's energy infrastructure. They note that the risk of Iran and its allies targeting Gulf oil infrastructure would likely be greatest in the third, broader strikes scenario.
Goldman quantifies the $27 premium as consistent with the market pricing a 5 million barrel-a-day reduction in Middle East output that lasts six months. The bank also points to rising prices for December 2027 and December 2028 Brent futures as evidence that markets are considering the possibility of prolonged weakness in regional exports.
For 2027, Goldman added a 1 million barrel-a-day global supply disruption allowance to its assumptions, attributing the adjustment to risks stemming from the Middle East, the Russia-Ukraine conflict, and a wider trend toward geopolitical fragmentation.
On forecasting certainty, the strategists highlight that "the timing and location of disruptions" is nearly impossible to predict. Their baseline scenario nonetheless continues to assume prices will fall below forward curves over time, provided the risk premium eases and Persian Gulf output keeps recovering.
Still, the bank describes the balance of risks as "more symmetric" than before but with a tilt to the upside. Under a materially adverse outcome - where Gulf output remains roughly 3.5 million barrels a day below its 2025 average - Goldman says Brent could spike to $140 and average about $130 in 2027. Conversely, if output increases by about 2.5 million barrels a day above 2025 levels and the assumed disruption does not materialize, Brent could plunge into the $60s.
Implications and context
The revised forecasts and quantification of the risk premium signal that traders and market analysts are placing greater weight on geopolitical shock scenarios when pricing crude. By explicitly adding an allowance for global supply disruption in 2027 and stressing that future outcomes depend heavily on unpredictable events, the strategists underline the range of potential price paths from deep downside to substantial upside.
The projection adjustments and scenario analysis are presented as conditional on how disruptions evolve and on the extent to which Persian Gulf production recovers. Goldman maintains its base case - price declines below forward levels - but the bank's updated numbers underscore how sensitive markets are to shifts in perceived supply risk.
Note: The figures and scenario outcomes cited reflect Goldman Sachs' forecasts and the probabilities described by the strategists. The timing, scale, and location of any supply disruptions remain uncertain, and those uncertainties are central to the updated outlook.