Goldman Sachs: Brent Could Break $120 If Hormuz Strait Disruption Persists
0xBroomberg
Goldman Sachs warned on July 20 that Brent crude could top $120 per barrel in Q4 if Strait of Hormuz shipping stays disrupted — but the bank's base case is still $80. The gap between those two numbers is the uncertainty itself.
What would it take to trigger the $120 extreme scenario?
One threshold matters: whether Persian Gulf shipping flow recovers above 45% of pre-war levels.
This means → as long as flow stays below that line, the market will reprice $120 from "extreme assumption" to "plausible path."
Brent futures currently sit at $88.65 per barrel. In late April, at the peak of the US-Iran flare-up, they briefly topped $126 — proof the price can reach that level.
Why is Goldman's base case so much lower?
The base-case numbers: Q4 Brent at $80, next year at $75.
The precondition is explicit — Middle East tensions de-escalate.
In plain terms = Goldman's base price is a bet that "the conflict cools down"; the $120 scenario is a bet that "it doesn't." The analysts themselves concede that risks are skewed to the upside.
What forces could keep oil from actually hitting $120?
Goldman flags two downward forces: weak Chinese imports and higher demand elasticity — meaning consumers cut fuel use faster when prices rise.
This means → even if the supply side is choked, the demand side may not absorb the full price increase. Some of the rally could be eaten by the simple fact that fewer people buy oil at that price.
But global inventories fell in Q2. This reflects a thinning buffer — the market's shock-absorption capacity is weakening.
How does Goldman suggest investors hedge?
The specific trade: go long the December 2026 to March 2027 European diesel time spread — a bet that further-dated diesel prices strengthen relative to near-term ones.
The logic chain: the diesel market was already extremely tight before the conflict → Ukraine keeps striking Russian refineries + hurricane season + extreme heat + deferred refinery maintenance → diesel supply faces multiple stacking pressures.
In plain terms = Goldman sees diesel as the most fragile link in the energy chain, so the hedging money should go into diesel — not crude itself.
Content is for reference only, not financial advice.