Goldman Sachs: The risk of rising oil prices has increased, if the Strait of Hormuz is blocked long-term or reaches historical high levels.

Goldman Sachs released a research report stating that oil prices are likely to continue to rise in the short term, as the flow through the Strait of Hormuz remains at extremely low levels. If the low flow continues to focus the market on the risk of extended interruptions, Brent crude oil has the opportunity to surpass the historical high of 2008. The bank believes that recent attacks on energy infrastructure and the risk of war in Iran pose long-term risks to oil prices. The report analyzes the five largest supply shocks in history, with production still being affected by an average of 42% four years later, often reflecting damaged infrastructure and low investment. By 2025, Iran and seven other Persian Gulf countries are expected to produce 3.5 million barrels per day and 21.8 million barrels per day of crude oil, equivalent to 30% of global oil supply. If there is a sustained decrease in production, it will bring upward pressure on oil prices. However, the Organization of the Petroleum Exporting Countries may deploy a large amount of idle capacity after the reopening of the Strait of Hormuz to stabilize the tight market. On the demand side, strategic reserve replenishment may accelerate due to currently low inventory levels, with countries potentially increasing their strategic petroleum reserve targets. It is estimated that the global strategic reserve replenishment speed may increase from 750,000 barrels per day in the base scenario to 1.9 million barrels per day, possibly bringing a $12 upside risk to the bank's oil price forecast by the end of 2027. On the other hand, high oil prices may accelerate fuel efficiency improvements and fuel substitution, slowing down economic growth and leading to a slowdown in demand. Goldman Sachs' scenario analysis indicates that regardless of the short term or 2027, oil price risks are still skewed to the upside. The sustainability of past large supply shocks highlights the risk scenario of extended interruptions and continued significant supply losses, which may keep oil prices above $100 per barrel for a longer period of time.