Goldman Sachs has warned that Brent crude could rise above $120 per barrel in the fourth quarter of 2026 if disruptions to oil shipments through the Strait of Hormuz continue.
The bank stressed that this is not its central forecast. Its base case assumes that tensions in the Middle East will ease, Gulf exports will gradually recover and Brent will average around $80 per barrel in the final quarter of 2026.
Under a more severe scenario, however, oil production in the Persian Gulf would not fully recover until late 2027. Goldman Sachs estimates that Brent could exceed $120 in late 2026 and average about $100 per barrel next year if those conditions persist.
The Base Case Still Points to $80 Oil
Goldman Sachs expects Brent to average $80 per barrel in the fourth quarter of 2026 and $75 during 2027 under its base-case scenario.
That outlook depends on a de-escalation of regional hostilities and a gradual normalization of oil flows through the Strait of Hormuz.
The bank’s $120 projection should therefore be viewed as a stress scenario rather than a conventional price target. The wide gap between the two forecasts reflects the uncertainty surrounding Gulf production, tanker movements and the duration of the conflict.
Goldman had lowered its fourth-quarter forecast to $80 in June after bringing forward its expected timetable for the normalization of Gulf exports. The latest escalation has again increased the risk that this recovery may be delayed.
Brent Climbs Back Above $91
The warning came as renewed hostilities between the United States and Iran pushed oil prices higher.
Brent crude rose to $91.05 per barrel on July 21, reaching its highest level in five weeks. West Texas Intermediate increased to $85.15 per barrel.
Prices were also supported by threats from Iran-backed Houthi forces to disrupt Saudi oil exports through the Red Sea. Two tankers carrying Saudi crude toward Asian markets reversed course following the threats, although operations at Saudi Arabia’s Yanbu export terminal continued normally.
The simultaneous threat to shipping routes around the Strait of Hormuz and the Red Sea has increased concerns that Saudi Arabia and other Gulf producers could struggle to redirect exports if regional tensions intensify.
Hormuz Has Limited Alternatives
The Strait of Hormuz remains one of the most important energy transit routes in the world.
Nearly 20 million barrels of oil per day passed through the waterway in 2025. That volume represented roughly a quarter of global seaborne oil trade, with around 80 percent of the shipments destined for Asian markets.
Saudi Arabia and the United Arab Emirates can divert some crude through pipelines that bypass the strait. However, the International Energy Agency estimates that only 3.5 million to 5.5 million barrels per day of alternative export capacity is currently available.
Other producers, including Iraq, Kuwait, Qatar, Bahrain and Iran, remain far more dependent on Hormuz.
A prolonged disruption could eventually force those countries to reduce production. Once storage facilities begin to fill, producers cannot continue pumping oil that they are unable to export.
Falling Stocks Leave Less Protection
The oil market has also become more vulnerable because global inventories fell sharply during the second quarter.
The US Energy Information Administration estimates that worldwide oil stocks declined by an average of 5.1 million barrels per day during the second quarter of 2026. It expects inventories to fall by another 2.2 million barrels per day in the third quarter.
OECD oil stocks fell by another 62 million barrels in June after a 73-million-barrel decline in May, according to the International Energy Agency. Around 44 million barrels of the June reduction came from government emergency stock releases.
Emergency reserves have helped cushion the impact of lower Gulf exports, but continued withdrawals reduce the market’s ability to absorb another prolonged disruption.
Weak Chinese Demand Could Cap Prices
Lower demand may prevent Brent from reaching the most severe levels projected by Goldman Sachs.
China’s crude oil imports fell sharply in June as high prices, weaker refinery activity and large domestic inventories reduced the country’s need for additional purchases. Goldman Sachs estimated that Chinese imports were down by about 4.7 million barrels per day from a year earlier.
Consumers and refiners have also become more responsive to higher prices. Expensive oil encourages lower fuel use, refinery cutbacks and the substitution of alternative supplies.
These demand adjustments partly explain why Goldman’s base case remains well below $120 despite the continuing risks around Hormuz.
Goldman Sachs Highlights European Diesel
Goldman Sachs also identified European diesel as particularly exposed to further geopolitical disruption.
The bank recommended a long position in the European diesel time spread between December 2026 and March 2027. In practical terms, the strategy is a bet that diesel for delivery in December will become more expensive relative to supplies delivered the following March.
Diesel markets were already tight before the latest escalation. Reduced refinery exports from the Middle East, combined with disruptions affecting Russian refining capacity, could place additional pressure on European supplies.
Goldman Sachs’ $120 forecast remains conditional. But the risk would increase if Hormuz shipments stay depressed, Gulf production fails to recover and emergency oil inventories continue to decline.