Goldman Sachs has cautioned that the average price of Brent crude could surpass $100 per barrel during the year 2026 if the closure of the Strait of Hormuz persists for another month. This warning arrives at a time when the oil market is anxiously observing the durability of the ceasefire between the United States and Iran, and its effect on oil and gas flows through one of the world's most critical maritime corridors.
Bloomberg reported analysts from Goldman Sachs, including Dan Struyven, stating that the situation remains volatile, with risks to their price forecasts skewed to the upside. U.S. Vice President J.D. Vance described the ceasefire as fragile, given the unclear details surrounding the reopening of the strait despite announcements from Washington and Tehran regarding a halt to hostilities.
Current Market Conditions
As Brent crude rose by 3.31% to reach $97.89 per barrel, and West Texas Intermediate crude increased by 3.21% to $97.44 per barrel, Goldman Sachs expects flows through the Strait of Hormuz to begin improving this week. This is followed by a gradual recovery of Gulf Arab exports to pre-war levels within a month, suggesting that the average Brent crude price could reach $82 per barrel in the third quarter and $80 in the fourth quarter of the year.
In a negative scenario, which assumes a full month delay in reopening, the bank predicts that the average Brent price could exceed $100 per barrel in the second half of the year, while longer closure scenarios could push prices to $120 in the third quarter and $115 in the fourth quarter.
Background & Context
This warning underscores the exceptional importance of the Strait of Hormuz to the global energy market, through which approximately 25% of the world's seaborne oil trade typically passes. Former U.S. President Donald Trump indicated that the opening and security of the strait had long been agreed upon, threatening to resume military operations against Iran if the agreement was not fully implemented.
In contrast, the Iranian Ports and Maritime Organization announced two safe routes designated for vessels entering and exiting the strait. The official news agency Noor News reported that the adjusted transit pattern focuses around Lark Island, indicating that Tehran seeks to control the traffic regulation mechanism even after the ceasefire announcement.
Impact & Consequences
Concerns extend beyond the oil market to Western security arrangements for protecting navigation. The United States has requested its European allies to provide specific commitments and plans within days to help secure the Strait of Hormuz following the cessation of hostilities, according to a report from a senior NATO official.
This request came during discussions between U.S. officials and NATO representatives at the White House, Pentagon, and State Department, where Washington was pressing to translate allies' commitments into practical measures ensuring freedom of navigation in the strait. A coalition led by Britain, comprising over 40 countries, has pledged to assist in reopening the strait after the fighting stops, which is a passage through which about 20% of global oil and natural gas flows transit.
Regional Significance
The ongoing pressures between Iran and Israel raise questions about the realism of the U.S. timeline for reopening the strait. Amid this uncertainty, major shipping companies are exercising caution, with Bloomberg quoting Jotaro Tamura, the new president of Japan's Mitsui O.S.K. Lines, stating that the company needs to scrutinize the details of the ceasefire agreement before allowing its vessels to attempt crossing the Strait of Hormuz.
The company considers the safety of each vessel a priority, and understanding how the agreement will be implemented in the waters is essential before any decisions are made. Tamura also noted that it is "difficult to determine" the precise conditions necessary to deem the strait safe, and decisions will be made on a case-by-case basis.
In conclusion, the situation in the Strait of Hormuz is likely to remain a focal point of global interest, as it is tied to vital economic and security interests for many nations. With ongoing tensions, the question remains how this will affect global oil markets and regional economies.