Goldman keeps Brent forecast at $80

Goldman Sachs has retained its forecast for Brent crude to average $80 a barrel in the fourth quarter of 2026, arguing that constrained Middle East supply should support prices if hostilities between the United States and Iran ease before the end of the year.

The investment bank’s baseline projection assumes that geopolitical tensions will gradually subside and oil shipments through the Strait of Hormuz will recover. It expects Brent to average $75 a barrel in 2027 as supply expands outside the Middle East and demand growth remains subdued.

The outlook contrasts with Brent’s move above $95 this week as escalating military action and attacks on vessels intensified concerns over two of the world’s most important energy transit routes. Prices reached their highest level in about six weeks as traders assessed disruptions in the Strait of Hormuz and threats to shipping through the Bab el-Mandeb strait.

Goldman said risks surrounding its central projection were tilted sharply to the upside. A prolonged interruption to Gulf exports could push Brent above $120 a barrel during the fourth quarter, while the annual average could reach about $100 in 2027 if shipping constraints persist.

Oil flows from the Persian Gulf have fallen below half their pre-conflict level, tightening physical supplies and increasing freight, insurance and security costs. The Strait of Hormuz normally carries about a fifth of global petroleum consumption, making even a partial closure capable of creating shortages across Asia and Europe.

The bank’s forecast depends heavily on whether producers can restore exports without further attacks on tankers, terminals or pipelines. Gulf suppliers have substantial production capacity, but replacing lost volumes requires safe maritime passage and access to loading facilities. Alternative pipelines can bypass part of the strait, although their capacity is insufficient to replace all seaborne exports.

Renewed hostilities have changed the balance of the oil market for 2026. Analysts now expect a global supply deficit of about 1.5 million barrels a day, twice the level projected earlier, after disruptions reduced crude availability from the Gulf. Global output increased by 4.1 million barrels a day in June but remained 9.4 million barrels below pre-war levels.

Goldman’s $80 forecast also reflects expectations that weaker consumption will limit the duration of any price surge. High fuel costs have already affected transport demand, industrial activity and refining margins in several markets. Earlier supply disruptions were estimated to have destroyed between 4 million and 5 million barrels a day of global demand during April.

China remains a central factor in the longer-term outlook. The expansion of electric vehicles, improvements in fuel efficiency and slower growth in petrochemical consumption have weakened the relationship between economic expansion and oil use. Goldman expects part of the demand slowdown to persist as alternatives gain a larger share of the transport market.

Supply growth outside the Gulf could also weigh on prices once shipping conditions stabilise. Production is increasing in the United States, Brazil, Guyana, Venezuela and the UAE, while additional barrels could enter the market as OPEC+ members unwind restrictions. That combination has raised expectations of a substantial global surplus in 2027, even after the deficit anticipated this year.

Other banks have adopted lower base-case estimates. Citi has projected Brent at $70 a barrel during the fourth quarter, while Morgan Stanley lowered its forecast for the period to $75. UBS expects prices to average about $80 after cutting its projection on assumptions that flows through Hormuz will improve.

The range of forecasts reflects uncertainty over diplomacy, military operations and the speed at which damaged energy infrastructure can return to service. Prices could fall towards $60 by the end of the year if exports recover faster than expected and demand remains weak. Continued attacks, however, would increase the likelihood of shortages and place Goldman’s $120 risk scenario within reach.

Higher oil prices are already adding to inflation concerns and complicating monetary policy. Rising crude and refined-product costs feed into transport, manufacturing and food prices, limiting the scope for central banks to reduce interest rates. Import-dependent economies face additional pressure through wider trade deficits and weaker currencies.