Goldman Sachs Warns Oil Prices Could Surge If Strait of Hormuz Is Disrupted

Goldman Sachs has warned that oil prices could rise sharply if shipping through the Strait of Hormuz is disrupted. The narrow waterway, through which a substantial portion of the world’s oil and liquefied natural gas flows, sits at the center of escalating tensions in the Middle East. The investment bank outlined specific scenarios and potential price outcomes that underscore how sensitive energy markets remain to any interruption in passage through the strait.

Outlined Scenarios and Price Estimates

Goldman Sachs presented two illustrative scenarios to show how different levels of disruption could affect oil prices:

• If oil shipments through the Strait of Hormuz were cut in half for one month, the bank estimates that oil prices could spike to around $110 per barrel.
• If Iran’s oil production were to fall by about 1.75 million barrels per day, prices could reach approximately $90 per barrel.

These scenarios make clear that both temporary transit disruptions and sustained production losses have the potential to move the market. A sudden, acute reduction in flows through the strait would likely produce a sharper, immediate price shock, while production declines would be felt over a longer period.

Why Tensions Matter Now

Geopolitical tensions in the region have increased following recent U.S. and Israeli military actions and Iran’s public consideration of responses that could include restricting access to the strait. Because the waterway is strategically crucial for global energy shipments, any credible threat to its open operation prompts rapid market reassessment. Traders and policymakers watch the situation closely because even the prospect of disruption can drive volatility in oil and gas markets.

Regional and Global Market Impacts

The impact of a disruption in the Strait of Hormuz would be uneven across regions. Goldman Sachs highlights that European natural gas prices could see particularly sharp increases, potentially rising to near 74 euros per megawatt-hour in a severe scenario. Europe’s sensitivity reflects its reliance on imported gas and limited near-term flexibility in supply.

In contrast, the United States is likely to be less vulnerable to immediate wholesale natural gas price shocks at home. The U.S. produces a large volume of domestic natural gas and has expanded export infrastructure, which can mitigate some of the direct consumer-level impacts from a regional supply disturbance. That said, disruptions in global oil supplies can still translate into higher gasoline and diesel costs, trade adjustments, and ripple effects across economies worldwide.

How Markets Could React

Should a disruption occur, several market mechanisms and adjustments would come into play. Global crude benchmarks would likely rise as traders price in tighter supply and elevated risk premiums. Shipping costs and insurance premiums for tankers could increase if the perceived risk of passage grows, adding to the delivered cost of hydrocarbons. Refiners and fuel distributors may see margin pressure and supply-chain disruptions, especially in regions heavily dependent on Middle Eastern barrels.

Markets might also respond through rerouting cargoes along longer sea lanes, shifting refining and storage strategies, and drawing on strategic petroleum reserves where available. Such adjustments take time and can be costly, which helps explain why even short-lived disruptions can have an outsized impact on prices.

Goldman Sachs’ Longer-Term View

Despite warning of a sharp immediate shock in the case of a significant disruption, Goldman Sachs expects oil prices to moderate over time and projects that prices could settle near $95 per barrel by late 2025. That baseline implies a market that eventually absorbs the shock through adjustments and additional supply responses, but the path to that equilibrium could involve marked volatility and elevated costs for consumers and businesses.

What to Watch

Key indicators to monitor include developments in diplomatic and military activities in the Persian Gulf, reported volumes transiting the Strait of Hormuz, changes in Iran’s oil output, and market signals such as futures curves, shipping rates, and tanker insurance premiums. Policymakers and market participants will also be watching inventories and the use of strategic reserves as tools to blunt price spikes should they occur.

In summary, Goldman Sachs’ analysis serves as a reminder of how closely linked geopolitical stability in the Strait of Hormuz is to global energy prices. While longer-term adjustments could bring prices back toward the bank’s forecast, the immediate consequences of any major disruption could be steep and swift.