Goldman Sachs: Escalating Middle East Tensions Could Push Oil to $120; Recommends Going Long on Natural Gas and Diesel
nashnova research
Goldman's commodity co-head Daan Struyven warns Brent crude — now at ~$97 — could hit $120 if Middle East shipping attacks keep escalating. Yet Goldman does not recommend going long crude directly; it favors natural gas and diesel, where the supply shock hits harder.
Where are the upper and lower bounds for oil?
Bull case: shipping attacks in the Middle East keep escalating → Brent target $120/barrel.
Bear case: regional exports normalize → target falls back to $80/barrel.
This means → the two scenarios are $40 apart. Goldman itself concedes extreme uncertainty — direction unknown, but the ceiling is already mapped.
Why doesn't Goldman recommend going long crude directly?
Struyven's own words: "The supply shock is more pronounced outside the crude oil market."
The data backs it up: diesel prices have more than doubled year-to-date; natural gas and refined products have outpaced crude by a wide margin.
In plain terms = crude is up, but diesel and gas are up more. A crude-only long position misses a large share of this energy rally's gains.
This reflects a shift in the transmission center of the shock — away from upstream crude, toward refining and end-use fuels.
What role does China play?
Goldman sees China as a "stabilizing force" in crude — actively cutting imports when prices run high, putting a ceiling on oil.
But China does not exert the same moderating effect on natural gas or refined products.
This means → gas and diesel lack China's built-in thermostat, giving them greater price elasticity — and that is one key reason Goldman prefers them.
How severe is the Strait of Hormuz bottleneck?
The U.S. military struck Iranian oil-transport vessels last week. Iran responded by declaring new restricted zones beyond the Strait; the U.S. Navy continues blockading Iranian ports and escorting other producers' tankers.
Shipping-data firm Kpler shows daily commercial transits through the Strait averaged ~10 vessels over the past ten days — the lowest since May this year.
ANZ expects exports to remain constrained for the rest of 2026, with a return to pre-conflict transit volumes not likely until late Q1 or early Q2 2027.
Will OPEC+ ramp up production to cap prices?
OPEC+ met last week and left its October output policy unchanged; real room to add barrels remains limited.
In plain terms = the supply side cannot release volume near-term, and the demand side for diesel and gas lacks China's cushion. Goldman's hedge thesis is a bet on exactly this supply-demand mismatch.
The key variable ahead: whether natural gas and refined-product price elasticity keeps outrunning crude will be the litmus test for this trade logic.
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