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Brent crude oil prices could surge above $120 per barrel in the fourth quarter if disruptions in the Strait of Hormuz persist, according to Goldman Sachs. The investment bank, however, clarified that such a sharp rally is not its base-case expectation.
The warning comes as global oil markets remain on edge amid renewed geopolitical tensions in the Middle East. Brent crude recently climbed above $91 a barrel following fresh hostilities involving the US and Iran, raising concerns over potential supply disruptions.
Market sentiment has also been affected by threats from Iran-backed Houthi rebels in Yemen to impose a blockade on Saudi oil shipments. The warning has added to concerns over the security of key energy routes.
With disruptions at the Strait of Hormuz, the Red Sea has become an increasingly important alternative for transporting crude from the Persian Gulf to global markets. Any disruption along this route could further tighten supplies and push prices higher.
In a note dated July 20, Goldman Sachs analysts said escalating tensions in the region and a sharp decline in Persian Gulf oil flows had already contributed to the recent rebound in crude prices.
Despite highlighting the upside risks, Goldman Sachs maintained that its central forecast assumes geopolitical tensions gradually ease. Under that scenario, the bank expects Brent crude to average around $80 per barrel in the fourth quarter and decline to about $75 per barrel next year.
The analysts cautioned, however, that risks remain skewed to the upside because of ongoing shipping disruptions through the Strait of Hormuz and the possibility of further interruptions in the Red Sea.
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Goldman Sachs noted that declining global oil inventories during the second quarter have left the market more exposed to supply shocks. At the same time, weaker crude imports by China and greater demand elasticity could help contain any sustained price spike.
For investors seeking protection from prolonged geopolitical uncertainty linked to the Middle East and Russia, the bank recommended taking a long position in the European diesel timespread between December 2026 and March 2027.
According to the analysts, diesel markets were already tight before the latest conflict, with continued Ukrainian attacks on Russian refineries, hurricane risks, extreme summer temperatures and refinery maintenance delays adding to supply concerns.
Brent crude futures were last trading at $88.54 per barrel. Earlier this year, prices briefly surged above $126 a barrel during the initial phase of the US-Iran conflict.
