Oil could hit $120 on prolonged Hormuz closure, Goldman warns
Goldman Sachs has reversed its recent forecast of an oil glut, warning prices could reach $120 per barrel later this year as prolonged conflict in the Middle East chokes off critical shipping routes.
Goldman Sachs now projects crude oil could surge to $120 per barrel towards the end of the year. The bank’s commodity analysts shifted their stance as geopolitical tensions continue to severely restrict traffic through the Strait of Hormuz. This represents a sharp pivot from just a few weeks ago, when the bank was forecasting a market surplus.
"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," Goldman's analysts said in a note. The drop in throughput contradicts the bank's early July assumption that Hormuz traffic would soon normalize. At that time, Goldman warned that a global race to rebuild inventories would not be enough to offset a massive glut arriving next year.
That normalization thesis has collapsed alongside the June ceasefire. The strait is now effectively paralyzed, with Iran striking U.S.-affiliated ships and the U.S. targeting Iranian-linked vessels. Ship-tracking data shows the handful of vessels still attempting the crossing are running in "dark mode" with transponders disabled, though even these numbers are dwindling fast.
The logistical risks for regional crude exports have also expanded into the Red Sea. Yemen's Houthis have threatened Saudi Arabia with a "maritime embargo," effectively warning of a naval blockade. The group cited the action as a response to Saudi Arabia's siege of Yemen.
Such a blockade would directly threaten a vital alternative export route for the kingdom. Saudi Arabia pumps much of its crude through an East-West pipeline to bypass Hormuz entirely, loading it onto tankers at the Red Sea port of Yanbu.
For investors and corporate planners, the rapid forecasting reversal highlights the extreme volatility embedded in current energy markets. Previous assumptions of weak demand and ample supply are now secondary to immediate geopolitical risks. Market participants must now price in a prolonged supply deficit rather than the massive surplus Goldman had previously anticipated.
