Oil Prices Soar Amid Triple Chokepoint Crisis

Goldman Sachs' analyst Samantha Dart warns that three simultaneous geopolitical crises are pushing oil prices to unprecedented levels. The current situation, where flows through the Hormuz Strait, the Red Sea, and the Black Sea are constrained, has no modern precedent in oil markets.

The constraint on Persian Gulf exports is particularly concerning, as it has gone from 80% of normal to 40%. This reversal matters because global inventories have fallen significantly since the first ramp up in April, which means there's no longer a fat storage buffer to draw on while flows normalize.

Dart laid out two scenarios for oil prices. The base case is that production from the Persian Gulf will normalize by early Q4, leading to Brent crude oil prices averaging $80 a barrel. However, the worst-case scenario is that only a gradual improvement will occur next year, pushing prices as high as $120 a barrel in Q4.

The speed of geopolitical resolution is the key variable in determining which scenario plays out. A durable de-escalation across all three chokepoints could let rising U.S. production and potential OPEC expansion pull prices back toward the base case. However, a drawn-out standoff pushes the curve toward the worst-case scenario.