Reviewing five rounds of oil shocks, Goldman Sachs predicts: oil prices may briefly exceed the 2008 peak in the short term, maintaining above $100 in the long term

Goldman Sachs believes that Brent crude oil may break the historical high of 2008, with the risk of oil prices "maintaining at $100 in the long term" increasing.

According to news from the trading desk, on March 19, Goldman Sachs' commodity research team led by Daan Struyven pointed out that under the ongoing blockage of the Strait of Hormuz, the upward trend in oil prices is difficult to stop.

If this sluggish state continues and the market begins to worry that supply disruptions may be prolonged, then the price of Brent crude oil is likely to break the historical high of 2008.

Data shows that Brent crude oil prices peaked at $147.50 per barrel in July 2008, setting a historical high.

Additionally, the report emphasizes that any rise in expectations regarding the potential restrictions on U.S. crude oil exports will further widen the price gap between Brent and U.S. WTI crude oil.

Most importantly, Goldman Sachs assesses that in a world after the Strait is reopened, production may be unable to recover for a long time due to damaged infrastructure.

Reviewing the five historical oil shocks, major supply shocks often last for years

Goldman Sachs' baseline assumption is that the traffic flow through the Strait of Hormuz will gradually recover starting in April, with prices falling back to the $70 range by the fourth quarter of 2026.

The problem is that this path has strong implicit assumptions on the supply side—not only must it reopen, but production must also recover relatively quickly after reopening.

To assess the "speed of recovery," Goldman Sachs looked back at the five largest supply shocks in the past 50 years and calculated that the affected countries still had an average production loss of 42% four years later. The main reasons are usually physical damage to infrastructure such as oil fields, pipelines, and ports, as well as severely insufficient subsequent investment.

Therefore, Goldman Sachs emphasizes that if Iran and the surrounding region's production potential suffers substantial damage, oil prices may remain above $100 in risk scenarios for a much longer time than the market currently expects.

Why is this clue being amplified? Because the weight of Middle Eastern supply is too high.

In 2025, Iran's crude oil production is expected to be 3.5 million barrels per day, while the other seven Gulf countries combined will produce 21.8 million barrels per day, accounting for about 30% of global crude oil production. Additionally, the region has a total offshore oil field capacity of 6.5 million barrels per day, which may recover more slowly due to complex engineering and high safety requirements.

The report analyzes that if Iran experiences a production gap close to the historical average of 42%, its crude oil production will be about 1.5 million barrels per day lower than before the shock.

Countries may go on a buying spree for oil, which itself will drive up prices

The ongoing uncertainty brought about by the Hormuz crisis may trigger a global acceleration in the construction of Strategic Petroleum Reserves (SPR) starting in 2027.

Goldman Sachs analyzes three reasons:

First, by the end of 2026, the strategic reserves of OECD countries may have been consumed to very low levels;

Second, this massive shock may prompt governments to raise future reserve targets;

Third, the 172 million barrels of strategic oil reserves provided by the U.S. to the market are considered "exchanges" rather than direct sales, and will need to be returned with a premium later on Goldman Sachs estimates that if the global strategic reserve construction speed accelerates by 1.2 million barrels per day compared to the baseline scenario, it will bring about an additional upward pressure of approximately $12 per barrel on oil prices by the end of 2027.

High Oil Prices Will Ultimately Kill High Oil Prices

Currently, almost all idle crude oil production capacity globally is trapped in the Persian Gulf due to disruptions in the Strait of Hormuz.

Goldman Sachs points out that historical experience shows that if there is no large-scale, sustained loss of production capacity, after the Strait reopens, OPEC core countries led by Saudi Arabia are likely to utilize this idle capacity to stabilize the market and compensate for production losses during the disruption.

In past supply crises, the production increases from Saudi Arabia and the UAE typically offset 70% to 90% of supply losses within two quarters.

The effect of releasing restricted capacity on suppressing oil prices is limited; what truly kills high oil prices is high oil prices themselves.

Goldman Sachs believes that high oil prices will accelerate energy efficiency improvements and fuel substitution, reducing economic growth's dependence on oil. Additionally, high oil prices will directly drag down the global economy, particularly the activities of energy-intensive industries.

Europe's industrial natural gas demand remains 20%-25% lower than pre-crisis levels following the 2022 energy crisis, serving as a cautionary tale.

Overall, the Balance Still Tips Towards Price Increases

Goldman Sachs emphasizes that whether in the short term or by 2027, the risks to oil prices are generally skewed to the upside.

The persistence of several historical supply shocks indicates that in scenarios where supply disruptions last longer or there are risks of large-scale, sustained production capacity losses, the possibility of oil prices remaining above $100 per barrel in the long term is real.

Goldman Sachs' baseline forecast for Brent crude oil prices in the fourth quarter of 2027 is $69 per barrel, with the report simulating deviations under different risk scenarios:

• Disruption in the Strait of Hormuz for 60 days: oil price +$24;
• Long-term loss of 2 million barrels per day of Middle Eastern capacity: oil price +$20;
• Both of the above occurring simultaneously: oil price +$42;
• Long-term production increase of 1 million barrels per day from OPEC core countries: oil price -$4;
• Accelerated construction of global strategic reserves: oil price +$12.

For investors, the current key issue is not when the Strait will reopen, but how many permanent scars remain on Middle Eastern oil capacity after it reopens. The latter will determine the price center for oil in the coming years.