Brent crude may cross $110 if Hormuz oil flow halves: Goldman Sachs

Business Standard

3 hours ago

Goldman Sachs estimates Brent crude prices could temporarily spike to $110 per barrel (/bbl) if the flow of oil through the key Strait of Hormuz shrinks by 50 per cent for a month and remains down by 10 per cent over the following 11 months. In that case, crude prices will settle to an average of $95 per barrel in the fourth quarter of 2025, the bank said in a note released on Monday.
In a more severe scenario where Iranian output remains suppressed, Brent would still peak at $90 but then stabilise at $70–80 per barrel in 2026, as global inventories shrink and spare capacity drops. The latest forecast comes days after Citigroup warned oil could cross $90/bbl if the strait is shut.
Brent crude prices have risen 13 per cent since the conflict began on June 13, while WTI has gained around 10 per cent. Brent oil futures rose to a five-month high of $78/bbl on Monday, before falling to $75.4/bbl at the time of writing this report.
For India, an estimated 10 per cent increase in crude prices may not have much of an impact on the economy where fundamentals remain robust, but a prolonged effect may cause harm, Madan Sabnavis, chief economist at Bank of Baroda, said. 'But if it is over $100 for a prolonged period of time it would mean virtually a 25 per cent increase over the base case assumption and can have a major impact on these variables,' he pointed out.
At the beginning of the year, the assumption was that oil would be around $80, and hence anything more than this will raise a red flag, he stressed. The impact on GDP will be driven primarily by how inflation behaves and affects consumption, Sabnavis said.
Closing the strait
Citing data from prediction market Polymarket, Goldman Sachs noted that markets now price in a 52 per cent probability of Iran closing the strait in 2025, though it emphasised that liquidity on such platforms remains limited. In an unprecedented step, Iran's Parliament voted on Sunday to allow emergency measures to block the narrow, strategic waterway, state media reported. However, the final decision rests with the country's Supreme National Security Council.
'With 20 million barrels per day of oil and 83–84 metric tonnes per year of liquefied natural gas (LNG), the strait accounts for 27 per cent and 20 per cent of global oil and LNG trade, respectively. It is unlikely that it will be impacted for long. Any short-term impact can lead to a further spike in oil prices,' Kotak Institutional Equities pointed out. Arguing that the recent oil price spike is primarily driven by market worries, it noted that prior to the conflict, oil markets were well-supplied and the planned reversal of voluntary cuts by the OPEC+ bloc was an overhang.
Iranian supply
According to Goldman Sachs estimates, a six-month-long cut in Iranian oil supply by 1.75 million bpd, followed by a gradual recovery, could drive Brent prices to $90 per barrel before declining into the $60 range by 2026. Despite international sanctions, China remains Iran's largest oil customer, accounting for 80–90 per cent of exports. In 2024 and early 2025, Iran's crude exports averaged between 1.38 million and 1.7 million bpd. In March 2025, exports reportedly surged to 1.71–1.8 million bpd amid fears of tighter American sanctions, according to global energy trackers.
Kotak said Iranian oil production has been impacted and currently stands at 3.5 million bpd, while exports are at 1.7 million bpd.
It is also not in Iran's interest to close the Gulf at a time when the country has been racing to get its oil out. Bloomberg reported last week that Iran has exported an average of 2.33 million barrels per day since June 13, fearing strikes on key oil infrastructure. Large amounts of crude have been brought to Kharg Island, Iran's key oil export terminal in the northern Persian Gulf.