Goldman Sachs: Renewed Tensions in the Strait of Hormuz May Delay Recovery of Middle East Oil Supply

Escalating geopolitical tensions in the Middle East are threatening the recovery of global oil supply. Goldman Sachs warns that renewed tensions in the Strait of Hormuz could hinder the pace at which Persian Gulf crude production recovers from pre-war levels.

According to Goldman Sachs estimates, Persian Gulf crude production in June remained approximately 10.5 million barrels per day below pre-war levels. Although Middle Eastern oil-producing countries began restarting shut-in wells over the past month, attacks on tankers have heightened risks for passage through the strait. Shippers remain uncertain about safe transit, placing recent oil flows through the Strait of Hormuz under pressure. This week, Brent crude futures briefly surpassed $80 per barrel, reflecting the market's high sensitivity to the situation.

On Wednesday, Trump stated that the temporary peace agreement between Washington and Tehran had ended, and the United States simultaneously revoked waivers allowing Iran to sell oil. However, he added that negotiations with Iran might continue. This uncertainty exposes the market to two-way risks.

Oil Flows Have Fallen Back to 70% of Normal Levels

Goldman Sachs estimates that following recent attacks on tankers, oil flows from the Persian Gulf have dropped to about 70% of normal levels. Previously, within the first 10 days after the reopening of the Strait of Hormuz, flows had briefly recovered to over 80% of pre-war levels.

In a report dated July 8, Goldman Sachs analysts, including Yulia Zhetkova Grigsby, noted, "Recent attacks on tankers highlight that transit risks remain elevated. With the ceasefire status still unclear, shippers may be hesitant to traverse the strait, which will suppress near-term oil flows through the Strait of Hormuz."

Shipping data shows that traffic through the strait nearly came to a standstill after consecutive days of mutual attacks between the U.S. and Iran, putting the previously fragile peace agreement to a severe test.

Two-Way Risks; Trend Depends on Negotiation Outcomes

Goldman Sachs believes that the risks facing Persian Gulf oil flows and oil prices are not one-sided.

If the 60-day negotiations continue to advance, and if parties provide security guarantees for shippers and reinstate waivers for Iranian crude sales, strait oil flows are expected to return to normal by the end of July. Conversely, if negotiations break down and attacks on tankers escalate, flows could decline further.

Notably, just last month, Goldman Sachs was among the banks that lowered their oil price forecasts, as flows through the Strait of Hormuz had shown some recovery at the time. Analysts at the bank also warned then that the risk of an oversupply of crude might reemerge. The sharp reversal in the current situation has once again cast uncertainty over the supply outlook.

Trump's Remarks Add Variables to the Market

Trump's announcement terminating the temporary peace agreement and revoking waivers for Iranian oil sales was one of the direct triggers of this round of market volatility. However, his indication that negotiations might continue leaves some room for interpretation regarding the direction of events.

This stance makes it difficult for the market to form clear expectations for future trends. If negotiations truly break down, the cancellation of waivers for Iranian crude supplies, combined with blocked passage through the strait, will further amplify the impact on the global oil market. On the other hand, if negotiations restart and make progress, the risk of oversupply previously warned about by institutions such as Goldman Sachs may once again dominate market pricing.