Goldman Sachs assesses "Iran Impact": oil prices rise by $18 per barrel, equivalent to the Strait of Hormuz being closed for 6 weeks

Middle Eastern geopolitical conflict suddenly escalates, posing severe risks of supply disruptions to the global energy markets.

According to Wind Trading Desk, Goldman Sachs’ latest report indicates that the weekend crude oil market has already priced in an $18 per barrel risk premium, equivalent to the expected impact of a complete six-week blockade of the Strait of Hormuz.

Over the weekend, Iran’s Supreme Leader Khamenei was killed during military operations involving Israel and the United States. Iran subsequently launched missiles and drones at U.S. assets and allies across multiple countries. Reports indicate that three oil tankers have been damaged, and many shippers, oil producers, and insurers have adopted a cautious wait-and-see approach.

As a result, WTI retail trading products surged 15% over the weekend. Goldman Sachs analysts, including Daan Struyven, stated that the current real-time risk premium of $18 per barrel is at the 98th percentile since 2005, and the bullish skew in the options market has also reached its highest level in the past 15 years.

On Monday, WTI crude futures opened over 11% higher, and Brent crude opened up 13%, before gains narrowed somewhat.

Additionally, the global natural gas and shipping markets are similarly affected. Goldman Sachs warns that if liquefied natural gas (LNG) supplies through the Strait of Hormuz are cut off for a month, European natural gas prices could surge by 130%. Meanwhile, the freight rates for Very Large Crude Carriers (VLCCs) from the Middle East to China have tripled in the month leading up to last Friday’s close.

The Strait of Hormuz as a Key Variable

The Strait of Hormuz is a vital artery for global energy, carrying nearly one-fifth of the world’s oil and liquefied natural gas supplies.

According to Goldman Sachs, in 2025, oil exports through this strait are projected to reach 13.4 million barrels per day. Although the International Energy Agency (IEA) estimates that 4.2 million barrels per day could be rerouted via existing alternative pipelines, in an extreme scenario of complete closure, about 16 million barrels per day of oil flow would be at risk.

Regarding infrastructure damage, media reports indicate that the Kharg Island oil export terminal, which handles over 90% of Iran’s oil exports, has experienced an explosion. The Duqm port has also been attacked, but there is no confirmed substantial damage to regional oil production or export infrastructure at this time.

Goldman Sachs currently maintains its baseline energy price forecasts, assuming no sustained supply disruptions, but is closely monitoring high-frequency flow data.

Oil Price Premiums and Scenario Analysis

The $18 per barrel real-time risk premium calculated by Goldman Sachs implies that the market is pricing in a disruption of 2.3 million barrels per day over a year, or roughly a one-month full shutdown of the Strait of Hormuz (assuming some buffer from alternative pipelines).

The report also models various disruption scenarios:

If the Strait of Hormuz is fully closed for a month without backup pipelines or Strategic Petroleum Reserve (SPR) releases, the fair value of oil could increase by $15 per barrel;

If the full 4 million barrels per day of backup pipeline capacity is utilized, the increase narrows to $12 per barrel; further, if a global SPR release of 2 million barrels per day is also enacted, the increase drops to $10 per barrel.

If the Strait is partially closed (50% flow restriction) for a month, with backup pipelines in use, the price increase would be $4 per barrel.

Supply Buffer: Can Spare Capacity, Inventories, and SPR Support?

Goldman Sachs estimates that current global spare capacity is about 3.7 million barrels per day, mainly concentrated in Saudi Arabia and the UAE. However, if the Strait of Hormuz remains closed, physical constraints will limit OPEC+ deployment of this spare capacity, as Saudi Arabia, Iraq, and the UAE collectively exported 13.1 million barrels per day through the Strait in 2025.

On the inventory side, global visible stocks are approximately 7.827 billion barrels, close to the median demand days (74 days), which provides the strongest predictive power for price. The U.S. Strategic Petroleum Reserve currently holds 415 million barrels, down about 180 million barrels from the end of 2021. Notably, according to the Financial Times, a U.S. Energy Department official stated there are “no current discussions about SPR releases,” possibly implying that Washington considers the potential price surge and duration to be limited.

OPEC+ announced an increase of 210,000 barrels per day in required production for April, slightly above Goldman Sachs’ previous estimate of 140,000 barrels per day. Additionally, Goldman Sachs notes that U.S. shale oil’s sensitivity to prices has decreased as resources mature, and significant increases in production typically take several quarters to materialize.

European Natural Gas Faces Doubling Risks

Unlike the oil market, European natural gas prices had largely not priced in geopolitical risks related to Iran before last Friday. However, Goldman Sachs believes that developments in the Middle East pose significant upside risks for European natural gas and global LNG prices.

The Strait of Hormuz typically transports about 80 million tons of LNG annually, accounting for 19% of global supply. Goldman Sachs estimates that a complete one-month disruption of LNG shipments through the strait would tighten Northwest European natural gas inventories by about 8% of total capacity.

In this scenario, European gas benchmark (TTF) and Asian spot LNG (JKM) prices could approach €74 per megawatt-hour ($25 per million British thermal units), a 130% increase from current levels. This price level previously triggered large-scale demand destruction during Europe’s energy crisis in 2022.

In contrast, the upside risk for U.S. natural gas prices remains limited.

Refined Oil and Shipping Rates Surge

The conflict’s impact on refined oil products and shipping rates is also direct. While Iran’s exports of refined products are only about 500,000 barrels per day, limiting immediate supply impact, approximately 9% of middle distillates (diesel, gasoil) and 18% of jet fuel exports pass through the Strait of Hormuz. Blockage would further risk pushing up already high refining margins, especially in Asian markets.

Shipping and insurance rates are also expected to rise sharply. Goldman Sachs notes that since the beginning of the year, global crude oil freight rates have increased by 50% (to $2.4 per barrel). Even without further large-scale disruptions, precautionary stockpiling and rerouting are enough to push tanker freight rates higher, which are already elevated.

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