Goldman Sachs has lifted its oil price outlook for 2026, warning that mounting geopolitical tensions around the Strait of Hormuz are pushing crude markets into a more fragile and risk-sensitive phase, with the potential for sharp price spikes if supply disruptions persist.
In a note issued late Sunday, the bank raised its forecast for Brent crude to an average of $85 per barrel in 2026, up from $77, while West Texas Intermediate (WTI) is now seen averaging $79, compared with an earlier $72 estimate. The revisions reflect what Goldman described as “extended disruptions” to crude flows through one of the world’s most critical passage chokepoints, alongside a resurgence in precautionary stockpiling by governments.
At the center of the bank’s outlook is the Strait of Hormuz, a narrow passage that carries roughly a fifth of global oil consumption. Sustained constraint there has historically translated into immediate price volatility, but Goldman’s latest assessment suggests the market is beginning to price in not just disruption, but duration.
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“The price when uncertainty peaks may be $135/bbl if the market required a risk premium to generate precautionary demand destruction offsetting supply destruction over six months,” the bank said, outlining a severe but plausible scenario involving “10 weeks of very low flows” and around 2 million barrels per day of persistent production losses.
That framing points to a market dynamic where prices are no longer reacting solely to actual supply losses, but to the anticipation of scarcity. Traders, in effect, are being forced to price in insurance against a worst-case outcome, driving what Goldman calls a “risk premium” into futures contracts.
In the near term, the bank expects Brent to average $110 per barrel through March and April, significantly higher than its previous $98 projection, as uncertainty over the scale and duration of disruptions intensifies. The adjustment reflects a market that is tightening faster than previously expected, with inventories offering a limited buffer against shocks.
Goldman outlined two primary upside risks. The first involves a prolonged disruption through Hormuz that could push Brent beyond its 2008 record highs, a level reached during a very different market structure but one similarly defined by supply anxiety. The second centers on sustained production losses in the Middle East of around 2 million barrels per day, a scenario that would materially tighten global balances and test the responsiveness of alternative suppliers.
Yet the bank’s outlook is not unidirectional. It cautioned that any de-escalation in U.S. military activity in the region could quickly unwind the risk premium currently embedded in prices. A sudden easing of tensions would likely trigger a rapid recalibration in futures markets, exposing how much of the current pricing is driven by geopolitical fear rather than physical shortages.
Another variable lies in Washington’s potential policy response. Goldman noted that any move by the United States to restrict oil exports, a step occasionally floated in times of domestic price pressure, could widen the spread between Brent and WTI. Such a divergence would mark the segmentation of global and domestic markets, with international benchmarks reacting more acutely to supply risks.
Beyond the immediate turbulence, Goldman’s medium-term view is more measured. The bank expects Brent and WTI to settle at around $80 and $75 per barrel, respectively, through 2027, as higher prices incentivize additional supply while simultaneously tempering demand growth. In this balancing act, the rebuilding of strategic petroleum reserves, drawn down in recent years, emerges as a countervailing force, tightening markets even as production responds.
“The easing effect from the price response of supply and demand roughly offsets the tightening effect from countries rebuilding their strategic oil reserves,” the bank said.
Market pricing on Sunday pointed to a degree of caution rather than panic. Brent crude futures edged down 8 cents to $112.11 per barrel, while WTI slipped 6 cents to $98.17, suggesting that traders are still weighing the probability of worst-case scenarios against the possibility of diplomatic containment.
That balance may prove increasingly difficult to maintain. Geopolitical rhetoric has continued to escalate, with Iran warning it could target the energy and water infrastructure of Gulf neighbors if the United States proceeds with threats to strike its electricity grid. The statement followed remarks by U.S. President Donald Trump, indicating potential action within a 48-hour window, raising the risk of a direct confrontation that could spill into energy markets.
For oil-importing economies, including many in Africa, the implications are serious. Higher crude prices feed directly into fuel costs, transportation, and inflation, compounding existing economic pressures. The upside is tempered by uncertainty for oil producers: elevated prices may boost revenues, but volatility complicates planning and investment.