Brent crude oil prices could surge beyond $120 a barrel in the fourth quarter if disruptions at the Strait of Hormuz persist, according to analysts at Goldman Sachs Group Inc. However, the investment bank does not currently view this scenario as its primary forecast.
In a note dated July 20, Goldman Sachs highlighted escalating tensions in the Middle East and a decline in Arabian Gulf oil flows to less than 45 percent of pre-conflict levels as key drivers pushing oil prices higher. The current outlook projects Brent crude at around $80 per barrel by the end of the year and $75 in 2027, assuming a de-escalation of regional hostilities. Nevertheless, the analysts pointed to upside risks related to ongoing disruptions in shipping lanes through the Strait of Hormuz and potentially the Red Sea, which remain vulnerable to conflict dynamics.
Global energy markets have experienced significant volatility this month amid renewed clashes involving the United States and Iran, as well as threats from Tehran-backed Houthi rebels in Yemen to block oil shipments originating from Saudi Arabia via the Red Sea. These routes have been instrumental in compensating for reduced Arabian Gulf exports caused by disruptions in the Strait of Hormuz.
Despite the heightened geopolitical risk, Goldman noted that a decline in Chinese oil imports paired with increased demand elasticity may temper the scale of price increases. The investment bank also recommended strategies for investors seeking to hedge against prolonged geopolitical uncertainties linked to both the Middle East and Russia. Specifically, it suggested a long position on the European diesel timespread for deliveries between December 2026 and March 2027.
Diesel markets have come under pressure due to persistently tight supply conditions predating the conflict, ongoing damage to Russian refineries from the war in Ukraine, and additional risks from climate-related disruptions such as hurricanes, summer heatwaves, and deferred maintenance at refining plants.
Brent crude traded near $88.40 a barrel recently, marking a roughly 45 percent increase year-to-date. Prices had earlier surged above $126 per barrel in late April. Industry watchers at Rystad Energy AS highlighted that with maritime traffic through the Strait of Hormuz nearly halted, Saudi Arabia’s export route through the Red Sea now faces heightened threats from Houthi forces. Jorge Leon, head of geopolitical analysis at Rystad, warned that absent a ceasefire and with continuing closure of the Strait of Hormuz alongside mounting threats to Red Sea shipping, oil prices could experience a substantial rebound.