PremiumGoldman's Commodity Desk Lays Out The Oil Price Scenarios From Iran War
Ahead of what is likely to be chaotic trading in oil, which is already up well over 10% in weekend OTC trading, Goldman's trading desk including strategists Daan Struyven, Samantha Dart, Yulia Zhestkova-Grigsby and others, have shared their views on the risks to energy prices from the Iran war. We excerpt from the report (available to pro subs) below.
Tanker traffic through the Strait of Hormuz--through which normally 20% of global supply for both oil and LNG flows--appears significantly disrupted as many shippers, oil producers, and insurers have shifted to a cautious wait-and-see mode amidst reports about damaged ships. We estimate the upside risks from developments in the Middle East. For now, our base case energy price forecasts, which assume no sustained supply disruptions, are unchanged.
- Oil. Based on the 15% weekend gain in retail prices, we estimate an $18/bbl real-time risk premium in crude oil prices, which corresponds approximately to our estimate of the fair value effect of a six-week full halt in Strait of Hormuz flows (allowing for spare pipeline capacity use as a partial offset). This estimated impact moderates to +$4 if only 50% of the flows are halted for one month. However, oil prices can rise substantially more if the market demands a premium for the risk of more persistent supply disruptions.
- Natural gas. While European gas (TTF) and spot LNG (JKM) prices have embedded little-to-no risk premium until this past Friday, we see significant upside risk to prices from a potential sustained disruption of LNG supply through the Strait of Hormuz. In a scenario where flows halt for one month, we think it is likely that TTF and JKM could approach 74 EUR/MWh ($25/mmBtu)--130% above current levels--a threshold that triggered large natural gas demand responses during the 2022 European energy crisis. We see limited upside risk to US natural gas prices.
- What to watch. Strait of Hormuz flows and any potential communication on the Strait by the US, Iran, China and GCC countries and on the broader conflict are now the most important variables to watch in energy markets.
Q0. What has happened in the Middle East over the weekend?
Iran's Supreme Leader Ayatollah Ali Khamenei has been killed after Israel and the US launched an ongoing military operation against Iran's leadership and military. Iran has responded by firing ballistic missiles and drones at US assets and allies across the region, targeting Israel, Bahrain, Kuwait, Qatar, Oman, the United Arab Emirates, Saudi Arabia, and Jordan.
Q1. What is the evidence on disruptions to energy flows? Have you changed your baseline energy price forecasts?
While flow data through the Strait of Hormuz through last Friday point to somewhat above annual average volumes for oil (Exhibit 1) and for LNG (Exhibit 2), there have been reports over the weekend of large drops in the number of tankers crossing through the Strait, and of three oil tankers reportedly damaged in the region. We think traffic may remain disrupted until there is further clarity on risks (e.g. mines, strikes). We assume no sustained flow disruptions in our baseline energy price forecasts, which we have left unchanged for now, and we will continue to monitor high frequency flows through the Strait closely.
Risks to Oil Prices
Supply at Risk
Q2. Is oil infrastructure in Iran and the Middle East damaged?
To our knowledge, there is no confirmed damage to oil production or to oil export infrastructure in the region.
Q3. How much oil supply from Iran and from the Middle East via the Strait of Hormuz is at risk?
Iran produced around 3.5mb/d of crude oil and about 0.8mb/d of condensate in 2025, together worth 4% of global oil supply. Iran's 2025 exports averaged 1.7mb/d for crude and condensates, 0.6mb/d for refined products, and 0.4mb/d for Natural Gas Liquids (NGLs).
The Strait is crucial for nearly 20mb/d or 1/5 of global oil production (Exhibit 1). Exports in 2025 through the Strait averaged 13.4mb/d for crude, 0.2mb/d for condensates, 3.5mb/d for refined products, and 1.4mb/d for NGLs and other liquids. Saudi Arabia, Iraq and the UAE together exported 13.1mb/d of oil via the Strait of Hormuz last year, with China as the main destination (Exhibit 12).
While estimates vary across agencies, the IEA has estimated that 4.2mb/d of the oil flows through the Strait can be redirected using existing spare pipeline capacities, implying around 16mb/d of oil flows at risk from a hypothetical full closure of the Strait.
Market Pricing
Q4. What risk premium is the oil market pricing?
We estimate the risk premium embedded in crude prices stood at $7/bbl on Friday evening as the difference between the Brent Friday close of $72 and our $65 estimate of fair value based on fundamentals such as OECD stocks.
Based on the 15% gain in the WTI retail trading product, we estimate a real-time risk premium embedded in crude prices of $18/bbl. This corresponds to the 98th percentile since 2005.
Call options offering upside protection embody a larger premium with 3 month 25-delta call skew at the 100th percentile of the distribution of the last 15 years already as of Friday.
Q5. How does that real-time risk premium translate in oil supply disruptions?
The $18/bbl real-time risk premium estimate corresponds to the market pricing a 1-year disruption of 2.3mb/d to global supply or approximately a 1-month full halt in Strait of Hormuz flows (though allowing for spare pipeline capacity use as a partial offset).
Scenarios
Q6. What buffers does the oil market have to absorb negative supply shocks? And what is OPEC+ signaling?
The oil market could draw inventories, deploy spare capacity once the Strait reopens, and potentially benefit from global SPR releases.
Global inventory levels rose last year from very low levels as global supply exceeded global demand by an estimated 1.7mb/d. Global total visible oil inventories stand at 7,827 million barrels now, near their historical median when expressed as covering 74 days of global demand (DoD). Relative to demand, inventory levels are also close to the median for OECD commercial stocks (the most predictive of prices), somewhat high in China, very high on water (with 373mb of sanctioned crude on water), but low in global Strategic Petroleum Reserves, excluding China. The US SPR consists of 415mb (down around 180mb from end-2021). However, a US Department of Energy official is reported to have told the FT that there have been "no discussions at all about the SPR", potentially signaling Washington believes any surge in prices will likely be limited or short-lived.
While highly uncertain, our preferred point estimate for global spare capacity is 3.7mb/d, largely concentrated in Saudi Arabia and the UAE (Exhibit 6). A hypothetical sustained closure of the Strait of Hormuz would be a physical impediment to OPEC's ability to deploy this spare capacity. Today, OPEC+ also announced it would raise required production by 0.21mb/d in April, slightly above our 0.14mb/d expectation.
While US shale remains the marginal short-term producer, US production has become less price-sensitive giving maturing shale, and raising US production significantly typically takes a few quarters
Q7. How much could the fair value of oil prices rise in key disruption scenarios?
We think of Iran-related oil disruption scenarios as either reductions in Iran oil supply only, or disruption to broader regional oil shipping or production.
Iran production disruptions: We estimate that a potential 1mb/d supply disruption--which corresponds to half of Iran's crude exports--for 12 months would boost the fair value of oil by $8 (although prices could rise more as escalation risks are reassessed).
Broader production disruptions: Because Iran targeted oil producers across the Middle East, we can't rule out future damage to oil production/export infrastructure in the region. The most recent comparable event is Iran's attack in September 2019 on the Saudi Abqaiq oil production facility, which caused the biggest ever single day oil production disruption and a nearly 20% intraday price move (although prices moderated as production fully recovered just over 10 days after the initial strike (Exhibit 9)).
Hormuz shipping disruptions: While the actual price effects could become more extreme if risk premia rise, we next estimate the following effects on the fair value of oil prices in scenarios for one-month disruptions to oil flows through the Strait:
- +$15 for a full one-month closure if there are no offsets (e.g. utilization of spare pipeline capacity, SPR release)
- +$12 for a full one-month closure if all estimated 4mb/d spare pipeline capacity is used
- +$10 for a full one-month closure if all estimated spare pipeline capacity is used and global SPRs are released for one month at a 2mb/d pace
- +$4 for a partial 50% one-month closure if all estimated spare pipeline capacity is used
- +$1 for a partial 25% one-month closure if all estimated spare pipeline capacity is used
Can we simply scale the estimated fair-value effects for a month disruption from Exhibit 5 by 0.25 and by 4 if the disruption were to last ¼ of a month or 4 months?
No, while our simple static model directly relates net exports from the Middle East to global and OECD inventories, the actual fair-value effects likely rise disproportionately with the length of the disruption.
If the disruption lasted ¼ of a month, the hit to production would likely be very small as producers would likely continue to store oil on land, and delay rather than significantly cut cumulative exports. Moreover, producers such as Saudi Arabia have precautiously increased exports and production ahead of the escalation.
In contrast, if oil were to be trapped for four months in the region and because inventories can’t draw persistently, oil prices would likely rise disproportionately to balance the market via price-driven demand destruction and refinery run cuts.
Q8. How much higher could risk premia lift oil prices?
While the scale and length of any potential disruption to oil flows from the Middle East and via the Strait of Hormuz remain uncertain, we have not changed our baseline oil price forecast for now, and still expect Brent/WTI prices to decrease to $60/56 by 2026Q4 (assuming no sustained supply disruptions). While the risks to our forecast are skewed to the upside, history suggests that price spikes driven by geopolitical shocks or/and temporary supply disruptions can be short-lived (Exhibit 9).
History shows that oil prices can rise significantly, and well above fair-value estimates when geopolitical uncertainty is high and when the market puts some weight on supply disruptions persisting. For instance, in mid-2022 oil prices exceeded our stocks-implied fair value estimate by nearly $20 (Exhibit 8). And Brent rose from the mid-60s in early June 2025 to the low $80s when Israel and the US struck Iran nuclear facilities before retracing quickly when the market gained confidence that actual oil supply was unlikely to be disrupted (Exhibit 9, right panel).
Q9. What is the potential impact on refined products and tanker freight markets?
The impact on refined products markets from any potential disruption in flows from Iran only would likely be limited given that Iran exports only 0.5mb/d of refined products.
But disruptions in the Strait of Hormuz flows could be very significant for middle distillates (diesel, gasoil), jet fuel, and naphtha markets. Last year, roughly 9% (or 0.8mb/d) of gasoil and diesel global exports went through the Strait of Hormuz and 18% of global jet fuel exports (0.4mb/d), which implies further upside risks to our already constructive refined products margins forecast, especially in Asia.
The escalation in the Middle East also poses substantial upside risks to tanker freight markets as insurance premia can rise very sharply. Our average global dirty (crude) freight rate has already increased by 50% ($2.4/bbl) year-to-date as (mostly sanctioned) oil on water continues to build and Venezuela pivots from the dark fleet to non-sanctioned vessels. The very Large Crude Carrier (VLCC) freight rate from the Arab Gulf to China had already tripled over the last month on Friday's close. And even without significant further disruptions in the Strait, precautionary restocking and redirection can raise already elevated freight rates further.
Natural Gas
Q10. How much risk premium has been embedded in European gas prices?
Differently from oil, we believe that until this past Friday, European natural gas prices had embedded little-to-no risk premium associated with Iran-related geopolitical risks. Specifically, TTF has been pricing in the bottom half of our estimated hard-coal-to-gas (C2G) switching range for the past month, modestly below our 36 EUR/MWh March 2026 TTF forecast (Exhibit 11). Once accounting for the recent sell off in carbon emission prices to below the 80 EUR/t embedded in our TTF price forecast, worth 2.0-2.5 EUR/MWh in gas-equivalent terms, prompt gas prices are still largely in line with our view that TTF needs to be in this C2G switching range to help manage NW European gas storage to above 80% full by end-Oct26, given that current inventory levels remain well below average. That remains our view, and we maintain our 34 EUR/MWh balance-of-the-year TTF price forecast.
Q11. What are the risks to global gas prices from this weekend’s developments in the Middle East?
We see significant upside risk to European gas and global LNG prices. The most significant impact to global gas markets would come from a potential disruption of the approximately 80 mtpa (302 mcm/d or 11 Bcf/d, 19% of global LNG supply) of LNG that typically flow through the Strait of Hormuz (Exhibit 2), which could potentially arise from an escalation of the ongoing conflict.
Specifically, in a scenario where LNG flows through the Strait are fully halted for one month, we estimate a resulting tightening of NW European gas storage equivalent to 8% of capacity[8]. Our fuel switching models suggest that European gas prices would need to maximize both switching into hard coal and into oil products by pricing at or above distillate fuel price levels for over three and a half months to offset it[9]. At current oil prices this would imply TTF essentially doubling to 62 EUR/MWh[10] ($21/mmBtu). Given that oil prices would also likely rally in this scenario, it is likely that TTF could approach the 74 EUR/MWh ($25/mmBtu) threshold that triggered large natural gas demand responses during the 2022 European energy crisis.
A hypothetical longer disruption of natural gas supply transit through the Strait of Hormuz lasting more than two months would likely lift European natural gas prices above 100 EUR/MWh ($35/mmBtu) to trigger more significant global gas demand destruction given the increased difficulty for the market to fully offset such a tightening shock ahead of the next winter.
Given that spot LNG prices (JKM) are closely tied to TTF to help Asia manage Atlantic-basin-produced LNG flows to the Pacific basin to satisfy its demand, the upside risks to TTF discussed above also apply to JKM.
Q12. Are there risks to global gas markets from Iranian pipeline gas exports?
We think these risks are very limited, as the global gas market exposure to Iran’s pipeline gas exports is modest, with Iran’s flows having decreased in recent years owing primarily to a growing domestic deficit. The most relevant remaining indirect link to global gas markets are its exports to Turkiye, which averaged just over 8 Bcm in 2025. These flows are under a contract that expires this summer and has yet to be renewed.
A scenario in which these flows are halted might trigger an increase in Turkiye LNG imports of similar size and, with NW Europe typically taking about half of total European LNG imports, might tighten NW European gas balances by the equivalent of half of the net 8 Bcm/y potential increase in Turkiye LNG imports, or 4 Bcm/y (11 mcm/d or 0.4 Bcf/d). To remind, we focus on NW Europe specifically (UK, Belgium, France, Netherlands and Germany) because we see it as the most relevant region to set TTF prices given its pipeline connectivity. We estimate that TTF would need to rally 4 EUR/MWh relative to hard coal prices to offset such tightening. This would justify TTF moving from the low end of the hard-coal switching range, where it has been for the past fours weeks, to the high end, near 36 EUR/MWh.
Q13. What are the risks to US Henry Hub gas prices?
Under a scenario of a large global LNG supply disruption, we believe the impact to US natural gas balances would be limited for three main reasons. First, the US is a large net exporter of LNG, with importing needs limited to very few cargoes in the US Northeast coast during cold spikes in winter. Second, Mexico and Canada, connected to US gas markets via pipelines, also have very limited LNG importing needs. Third, owing to low variable costs, US LNG export facilities typically operate at capacity, only reducing utilization rates during maintenance periods. As a result, there is little to no room for US LNG exports to rise even in the event of a global LNG price spike.
While US gas balances might tighten at the margin if oil product shortages regionally in the US or in Mexico lead to an increase in oil-to-gas switching for power generation or industrial applications, we think that upside risks to Henry Hub are limited. To be clear, differently from the tight 1H2022 US gas balance that caused Henry Hub to rally with Appalachia coal prices when international coal prices spiked with natural gas at the time, current US gas balances are more comfortable, as reflected in prompt US gas prices below $3/mmBtu and a very negative Oct26-Jan27 spread, signaling a market perception of elevated storage congestion risks this year.
