Goldman Sachs suggests that Brent crude oil could exceed its 2008 historical high, with increasing risks of prices remaining at or above $100 per barrel over the long term.
According to a research report from Goldman Sachs commodity analyst Daan Struyven's team on March 19, if disruptions to shipping through the Strait of Hormuz persist, the upward trend in oil prices will be difficult to halt.
Should the current constrained situation continue, raising market concerns about prolonged supply disruptions, Brent crude prices are likely to surpass the record high set in 2008. Data shows that in July 2008, Brent crude reached a peak of $147.50 per barrel.
The report also emphasizes that any increased perception of risk regarding potential U.S. restrictions on crude oil exports would further widen the price spread between Brent and U.S. WTI crude.
Crucially, Goldman Sachs assesses that even after the Strait reopens, production may not fully recover for an extended period due to infrastructure damage.
Reviewing five major historical oil supply shocks reveals that large disruptions often persist for multiple years.
Goldman Sachs' base case assumption involves a gradual restoration of traffic flow through the Strait of Hormuz starting in April, with prices declining to the $70 range by the fourth quarter of 2026.
The challenge lies in the strong implicit supply-side assumptions of this path—not only must the Strait reopen, but production must also rebound relatively quickly afterward.
To assess potential recovery speeds, Goldman Sachs examined the five largest supply shocks over the past 50 years. Their analysis found that, on average, affected countries still experienced a 42% production loss four years after the initial shock. Primary reasons typically include physical damage to infrastructure like oil fields, pipelines, and ports, coupled with severe underinvestment thereafter.
Therefore, Goldman Sachs stresses that if Iran and surrounding regions suffer substantial damage to their production potential, oil prices could remain above $100 per barrel under a risk scenario for much longer than the market currently anticipates.
This factor is magnified due to the disproportionately high supply weight of the Middle East. Iran's crude production is approximately 3.5 million barrels per day, with seven other Persian Gulf countries collectively producing 21.8 million barrels per day. Together, they account for about 30% of global crude output. Furthermore, the region has about 6.5 million barrels per day of offshore production capacity, which may see slower recovery due to complex engineering and high safety requirements.
The report analyzes that if Iran experiences a production shortfall close to the historical average of 42%, its crude output would be roughly 1.5 million barrels per day lower than pre-shock levels.
Persistent uncertainty from the Hormuz crisis could trigger a global acceleration in strategic petroleum reserve (SPR) building starting from 2027.
Goldman Sachs cites three reasons for this analysis: First, strategic reserves in OECD countries may be drawn down to very low levels by the end of 2026. Second, the magnitude of this shock may prompt governments to raise future reserve targets. Third, the 172 million barrels released from the U.S. Strategic Petroleum Reserve were provided via a "swap" mechanism requiring eventual repayment with a premium, not an outright sale.
Goldman Sachs estimates that if global SPR building accelerates by 1.2 million barrels per day compared to the baseline scenario, it could add approximately $12 per barrel of upward pressure to oil prices by the end of 2027.
Historically, high oil prices ultimately contain themselves by reducing demand. Currently, nearly all global crude spare capacity is effectively trapped in the Persian Gulf due to the Strait of Hormuz disruption.
Goldman Sachs points out that historical precedent suggests that, barring large-scale persistent production losses, OPEC core members led by Saudi Arabia would likely utilize this spare capacity to stabilize the market and offset production losses once the Strait reopens. In past supply crises, production increases from Saudi Arabia and the UAE typically offset 70% to 90% of supply losses within two quarters.
However, the mere release of spare capacity has a limited effect on suppressing prices; the true mechanism that kills high prices is the high price itself. Goldman Sachs believes high prices accelerate energy efficiency improvements and fuel substitution, reducing economic growth's dependence on oil. Furthermore, high prices directly dampen global economic activity, particularly in energy-intensive industries. The precedent is evident in Europe, where industrial natural gas demand remains 20%-25% below pre-crisis levels even after the 2022 energy crisis.
Overall, the balance of risks remains tilted towards higher prices. Goldman Sachs emphasizes that price risks for oil are skewed to the upside, both in the short term and looking out to 2027.
The persistence observed in historical supply shocks indicates a real possibility of oil prices remaining above $100 per barrel long-term, particularly under scenarios involving prolonged disruptions or significant, persistent production capacity losses.
Goldman Sachs' base case forecast for Q4 2027 Brent crude is $69 per barrel. The report models price deviations under various risk scenarios: - 60-day Hormuz Strait disruption: +$24 - Permanent Middle East capacity loss of 2 million barrels per day: +$20 - Both of the above occurring simultaneously: +$42 - OPEC core countries sustaining a production increase of 1 million barrels per day: -$4 - Accelerated global strategic reserve building: +$12
For investors, the key question is not when the Strait will reopen, but rather the extent of permanent damage inflicted on Middle Eastern oil production capacity once it does. The latter will determine the price floor for oil in the years to come.