Goldman Warns Brent Could Top $120 If Gulf Chokepoint Crisis Deepens

Brent crude futures are trading in the low $90s as the Gulf area escalation enters a tenth consecutive day. Iran attacked a tanker in the Strait of Hormuz, while two tankers carrying Saudi crude reversed course in the southern Red Sea after warnings from Iran-backed Houthi forces placed another critical maritime chokepoint under threat.

For more color on energy markets, Goldman commodities expert Daan Struyven warned clients on Monday that Brent crude futures could surge above $120 a barrel by the fourth quarter if disruptions in the Hormuz maritime chokepoint persist; he noted that such an outcome is not his base case.

Struyven sees Brent around $80 in the fourth quarter and $75 next year, assuming US and Iran tensions ease, but warned that risks remained tilted to the upside as Persian Gulf flows fall below 45% of prewar levels and Houthi threats in the southern Red Sea chokepoint.

"Escalation in the Middle East and the decline in estimated Persian Gulf flows to below 45% of pre-war levels have pushed oil prices back up," Struyven said.

The key upside price risks are:

• Shipping disruptions in Hormuz--and potentially the Red Sea--as the estimated 5mb/d rise since the start of the war in pipeline flows via Yanbu to the Red Sea, to more than 6mb/d (Exhibit 3), has played a key role in offsetting part of the decline in Hormuz flows. Damage to energy infrastructure from the Middle East and Russia-Ukraine wars.

• While the Iran war has likely not caused lasting major damage to oil production capacity so far, our analysis of the 5 largest prior supply shocks shows an average 42% hit to production in the affected country after 5 years, often reflecting infrastructure damage, underinvestment, or tight sanctions (Exhibit 4).

Struyven noted, "Brent might exceed $120/bbl in 2026Q4 and average $100 in 2027 if Hormuz remains disrupted through 2027 (Exhibit 2, red line). This scenario assumes Gulf output only fully recovers by Dec27, supported by pipeline extensions."

Struyven touched on how China's retreat from the crude market has temporarily capped prices, with net seaborne imports falling 4.7 million barrels a day from a year earlier in June. Weaker refinery runs, a 21% drop in retail gasoline volumes and estimated crude destocking of more than 1 million barrels a day drove the decline. He said imports may remain subdued if prices rise, given China's estimated 2 billion barrels of inventories and its ability to substitute coal and electricity for some oil consumption.

Struyven recommends clients buy the December 2026 to March 2027 European diesel timespread to hedge persistent Middle East and Russian supply risks. Diesel markets were already tight before the Iran war, while Russian refinery outages, low inventories and seasonal demand could push spreads higher. European diesel is preferred over crude, gasoline and US diesel because of constrained refinery output, less price-sensitive demand and fewer US policy-related risks.

According to the latest Bloomberg data, Hormuz traffic is at a near standstill. Analysts at Rystad Energy AS warned in a note that the Houthi threat against crude flows means that Saudi Arabia's Red Sea export route "is now directly in the line of fire."

"If a ceasefire does not materialize, and Hormuz remains largely closed while the Houthi threat to Red Sea shipping intensifies, the risk of a significant rebound in oil prices would be substantial," said Rystad analyst Jorge Leon.

Henri Patricot, Paris-based energy equity research analyst at UBS, also has an upside scenario for Brent:

In the near term, we see the main potential upside risk coming from a breakdown of negotiations and further escalation, pushing oil prices back to ~$100+/bbl. If major oil infrastructure in the region is targeted and the conflict extends beyond the summer, prices could spike to $120+/bbl. This would drive more severe demand destruction, with limited OPEC+ ability to act. While such a price may be short-lived, a structurally higher risk premium could keep prices in the $80s/bbl range and ongoing disruptions would keep it even higher.

The big risk now is that Hormuz disruption is unfolding after global oil buffers have already been depleted, with Cushing inventories reportedly near "tank bottoms." That leaves the market with limited capacity to absorb a prolonged supply shock and will likely increase pressure on the Trump administration to revive diplomacy once the US military has sufficiently degraded Tehran's missile and drone capabilities used to threaten commercial shipping through the strait.

 Gloal inventories

The US national average for regular gasoline breached $4 a gallon on Monday, intensifying pressure on the Trump administration to pursue Gulf diplomacy.

Gas prices may go higher...

The $4 threshold is both economically and politically sensitive, as it is where lower-income consumers typically begin cutting discretionary purchases and trading down across gas stations, convenience stores and quick-service restaurants, further weighing on consumer sentiment.

Professional subscribers can read the full GS note here at our new Marketdesk.ai portal.