Goldman Sachs is warning that Brent crude could climb back toward $120 a barrel by the end of the year if the Strait of Hormuz remains under threat. That would nearly match the war-era intraday peak of $126.41 hit on April 30. The warning comes as Middle East tensions keep the market on edge, though the bank's own base case still sees oil much lower.
Why the bullish call
Goldman analysts led by Daan Struyven say the risk of further escalation around the Strait of Hormuz has pushed prices higher. The bank estimates Persian Gulf flows have dropped to below 45% of pre-war levels. That's a big chunk of global supply. Add in the potential for Houthi rebels to blockade Saudi shipments via the Red Sea, and the upside gets bigger.
Lower global inventories have left the market more exposed to shocks. The bank notes that a slump in Chinese imports and greater demand elasticity could cap gains, but the skew is clearly toward higher prices.
Brent topped $90 a barrel on July 19 as the conflict intensified. Ceasefire hopes then eased the rally, and by July 21 the benchmark sat at $88.47. Still, Goldman sees the risk of a wider Hormuz blockade as a real possibility.
The base case — and the gap
Goldman's own base case forecast remains Brent at $80 a barrel in Q4 2024 and $75 in 2025. That scenario assumes de-escalation between the US and Iran. The $120 call is a tail risk, but it's one the bank thinks investors should take seriously. The gap between the base case and the risk case is wide — about $40 a barrel — and that uncertainty alone is rattling traders.
The bank isn't just issuing a warning. It's giving clients a specific way to hedge.
How to hedge the shock
Goldman recommends going long the December 2026 to March 2027 European diesel timespread. The reasoning: diesel markets are tight, Ukrainian strikes on Russian refineries keep tightening supply, and elevated gas price odds add to the pressure. The timespread bet is a play on persistent shocks from the Middle East and Russia, not just a short-term spike.
For now, the market is watching the Strait of Hormuz. The next move depends on whether the conflict escalates or cools. Goldman's base case says $80, but the bank is telling clients to prepare for $120.
