Goldman Sachs Flags Bumpy Oil Price Road Ahead Amid Middle East Uncertainty

Goldman Sachs has identified two main risks to its oil price forecasts for 2026. The bank's average crude forecast for Brent/WTI is currently set at $83/78 per barrel, but it sees both upside and downside potential due to growing uncertainty in the Middle East.

The biggest upside risk comes from reduced oil flows through the Strait of Hormuz, which currently stands at 10% of normal levels or around 2.1 million barrels per day. This is due to ongoing tensions between the US and Iran, with the United States Navy having begun a blockade on vessels entering or leaving Iranian ports and coastal areas.

Cuts to oil production in the Middle East have also been lower than Goldman's previous estimates, which has contributed to downward pressure on prices. The bank estimates that 8 million barrels per day of crude production were shut-in in the Persian Gulf in March, roughly in line with OPEC Secondary Sources but lower than IEA estimates.

The recent announcement of a US-Iran ceasefire and rising prospects of a near-term peace deal have further eased geopolitical risk premiums. However, Goldman notes that global visible oil inventories are drawing down at a slower pace, which may indicate growing demand losses or increased inventory draws in non-OECD Asia.