Goldman Sachs raises oil price forecast due to Strait of Hormuz disruptions and inventory declines

Investing.com - Goldman Sachs has raised its oil price outlook due to severe disruptions in Middle Eastern supply and market expectations of significant inventory declines as shipping through the Strait of Hormuz decreases.

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Brent crude has surged strongly, up 34% year-to-date to around $82 per barrel, driven by a sharp decline in oil flows through the Strait of Hormuz, damage to energy infrastructure, and storage congestion prompting Iraq to cut production by nearly 1.5 million barrels per day.

Goldman Sachs now expects Brent crude to trade in the mid-$80s in March, as the market digests conflicting signals. On one hand, flows through the strait may gradually recover; on the other, evidence of production outages and supply losses continues to emerge.

The bank has raised its second-quarter 2026 Brent crude forecast from $66 to $76 per barrel, an increase of $10, while raising its US benchmark WTI forecast from $62 to $71.

This revision reflects two assumptions. First, Goldman strategists expect recent supply disruptions to persist. They assume exports through the Strait of Hormuz will remain at about 15% of normal levels for roughly five days, then gradually recover to 70% over two weeks, and reach full capacity in the following two weeks.

“Based on our assumption of a major disruption in the Strait of Hormuz in March, we estimate Middle Eastern oil production losses of about 200 million barrels, with OECD commercial inventories expected to decline significantly in March,” wrote strategist Daan Struyven. Inventories are expected to decrease by about 76 million barrels month-over-month, compared to an earlier assumption of a 10 million barrel increase.

Additionally, Goldman Sachs expects geopolitical uncertainties to continue supporting oil prices. The strategists state, “Uncertainty surrounding Iran and Russia-Ukraine tensions will persist, continuing to support risk premiums into Q2 2026.”

Looking further ahead, the bank has modestly raised its forecasts. It now expects Brent crude to average $66 in Q4 2026, up from $60, and $70 in 2027, up from $65. WTI is forecasted to average $62 in 2026 and $66 in 2027.

Goldman Sachs still expects prices to decline from current levels as risk premiums diminish and inventories rebuild after disruptions are resolved. Its baseline scenario assumes Brent will fall from about $82 today to roughly $66 in Q4 2026.

Nevertheless, strategists note that risks remain “significantly skewed to the upside.” These include “prolonged disruptions in Strait of Hormuz exports and damage to oil production facilities.”

For example, if exports through the Strait of Hormuz remain subdued for another five weeks, Goldman estimates Brent could rise to about $100 per barrel, as markets adjust to prevent inventories from falling to dangerous lows.

On the other hand, a faster normalization of flows through the Strait of Hormuz presents a key downside risk to oil prices.

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