Overview
Goldman Sachs' commodities research team has upgraded the risk profile for oil following fresh disruptions in the Persian Gulf that are constraining flows through the Strait of Hormuz. The bank's prior base case assumed Brent would trade in the $80s in March and in the high $70s during the second quarter, but strategists now see a greater chance that prices - and especially refined product prices - could move meaningfully higher if reduced shipments persist through March.
Size and persistence of the shock
Goldman estimates that shipments through the Strait of Hormuz are down by about 1.8 million barrels per day, which the bank characterizes as roughly 10% below normal levels. The firm also notes this outcome is well under its earlier assumption of only a 15% disruption, underscoring a mismatch between prior expectations and current conditions.
Attempts to offset the shortfall through alternative export corridors have provided only partial relief. Net redirection through pipelines and ports such as Yanbu in Saudi Arabia and Fujairah in the United Arab Emirates has averaged roughly 0.9 million barrels per day in recent days, compared with a theoretical rerouting capacity of about 3.6 million barrels per day. Operational disruptions - including strikes at Fujairah and local shortages of marine fuel - have further complicated rerouting efforts and highlighted vulnerabilities in regional export infrastructure.
Market reaction and mechanics
Shipping conditions remain unsettled, with many tanker operators taking a cautious, wait-and-see stance as security risks rise. Goldman argues that higher insurance premiums alone do not fully account for the decline in shipments; some insurers continue to provide coverage, and freight rates have increased substantially - in many cases enough to offset the higher insurance costs. Therefore, the fall in traffic appears linked both to elevated security risks and other operational constraints.
The bank also calculates that the effective loss of roughly 1.7 million barrels per day of Persian Gulf supply represents a shock materially larger than the Russian output disruption in early 2022. Such a reduction, if sustained, could rapidly erode global inventories and push prices toward levels that would begin to curb demand.
Demand, inventories and downside rebalancing
Goldman warns that price increases induced by the supply shock could reach a point that triggers demand destruction. The bank highlights two transmission channels that could intensify upward pressure on prices: consumer stockpiling and a decline in exports of refined products from non-OECD countries. Either or both would accelerate inventory drawdowns and increase the risk of sustained higher prices.
Path to recovery
According to Goldman, a meaningful restoration of flows through the Strait of Hormuz would likely require one of three outcomes: a broader de-escalation of the conflict producing fewer security risks for shipping; materially stronger U.S. military protection for tankers; or a decision by Iran to permit safe passage through the chokepoint. In the absence of any of these developments, the bank concludes that downside risks to its base case are diminishing while upside risks remain dominant.
Market implications
Goldman says it may revise its price forecasts if shipping flows do not normalize soon, reflecting the rapidly evolving balance between supply-side disruptions and the ability of alternative routes to compensate. For market participants, the immediate takeaway is that oil price risk has shifted meaningfully toward higher outcomes, with refined products particularly exposed if flows through the Strait remain depressed throughout March.
This analysis reflects Goldman Sachs' internal assessment as communicated to clients and does not introduce additional facts beyond that communication.