Red Sea tensions increase near-term upside risks to oil prices; Goldman Sachs maintains its 2026Q4 Brent forecast at $80

Overview

This report discusses the impact of Red Sea tensions, declining Kazakhstan CPC exports amid an escalation in the Russia-Ukraine conflict, and changes in Middle East supply and global inventories on oil prices. Goldman Sachs maintains its base-case forecast of Brent at $80/bbl and WTI at $76/bbl in 2026Q4, assuming tensions ease in Q4, while emphasizing that near-term oil price risks are net skewed to the upside. By 2027, under the base assumption that Hormuz remains open, the report expects a supply surplus to pull average Brent/WTI prices back to $75/$70.

Core views

The core views include: first, Red Sea tanker attacks and the decline in Kazakhstan exports have increased short-term supply disruption risks; second, lower Middle East output in summer, recovering travel demand, and slower SPR releases will drive further declines in global and OECD commercial inventories, supporting oil prices in July and August; third, if Hormuz remains open in 2027, the supply-demand balance will shift to a sizable surplus and oil prices will ease moderately; fourth, even with a 2027 surplus of 3.2mb/d, global strategic restocking, U.S. shale oil price sensitivity, and supply disruption risks may limit Brent downside below the high-$60s range; fifth, if Hormuz disruptions persist into 2027, the oil price upside scenario becomes significant.

Analysis framework

The report uses a combination of supply-demand balance tables, shipping bottleneck scenarios, inventory cycle analysis, and price scenario analysis. On the supply side, it focuses on Middle East production, forecast revisions for the UAE and Russia, CPC exports, and OPEC/non-OPEC output; on the demand side, it tracks downward revisions to demand in China, South Korea, and the Middle East, as well as seasonality from the summer travel season; on the inventory side, it observes global visible inventories, OECD commercial inventories, and the pace of SPR releases/restocking; on the risk side, it builds base, upside, and downside scenarios around shipping frictions in Hormuz, Bab-al-Mandab, and Suez.

Methodology notes

• Supply-demand balanceGlobal oil supply-demand balance table

  Uses global supply, global demand, and inventory changes to assess pressure on crude oil prices.

  The report provides a 2025-2027 supply-demand outlook and expects a global deficit of 2.1mb/d in 2026Q3, while under the assumption that Hormuz remains open, the average surplus in 2027 is projected at 3.2mb/d.

• Scenario analysisOil price scenarios under shipping disruptions

  Assesses upside tail risks to prices around transport frictions in Hormuz, Bab-al-Mandab, and Suez.

  The base case assumes tensions ease in Q4; the upside scenario assumes Hormuz disruptions persist into 2027, with Brent potentially exceeding $120/bbl in 2026Q4 and averaging $100/bbl in 2027; if BaM and Suez also remain disrupted, prices could rise by a further roughly $25/bbl.

• Inventory analysisCommercial inventory and strategic reserve tracking

  Judges short-term support for oil prices through commercial inventory draws and the pace of SPR releases/restocking.

  The report notes that global visible inventories have reached their lowest level of the year, net OECD SPR releases have slowed sharply after large releases in Q2, and South Korea and Japan have shifted toward restocking.

• Seasonal demandSeasonality of summer travel demand

  Uses seasonal travel demand to explain the rebound in demand in Q3.

  The report expects global oil product demand in Q3 to be boosted by around 0.8mb/d versus Q2 due to summer seasonality.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Brent crude oil

  Core forecast asset

  Strengths

  Supported in the short term by Red Sea risks, lower CPC exports, inventory draws, and summer demand; large upside convexity in the upside scenario.

  Weaknesses

  If Hormuz remains open in 2027, a 3.2mb/d supply surplus will pressure the average price.

  Comparison

  Compared with WTI, Brent more directly reflects global shipping and Middle East risk premia.

  Risks

  Persistent disruptions in Hormuz, Bab-al-Mandab, and Suez would significantly lift prices; if supply exceeds expectations and demand weakness persists, prices could fall to the low-$60s range.

• WTI crude oil

  U.S. crude benchmark that follows Brent

  Strengths

  Supported by global oil risk premia and the price sensitivity of U.S. shale supply.

  Weaknesses

  Its 2027 base-case average price is below Brent, with the report forecasting $70/bbl.

  Comparison

  The 2026Q4 WTI forecast is $76/bbl, below Brent at $80/bbl; 2027 WTI/Brent is $70/$75.

  Risks

  If the global supply surplus widens or demand weakens, WTI will also face pressure; if geopolitical shocks intensify, it will rise alongside Brent.

• Dec26-March27 European diesel/gasoil timespread

  Hedging instrument

  Strengths

  The report sees it as suitable for hedging continued escalation in Middle East and Russian geopolitical shocks.

  Weaknesses

  This strategy is more geared toward hedging and spread trading, with returns dependent on diesel cracks, inventories, and changes in the forward curve.

  Comparison

  Compared with directly going long crude, the diesel spread is more focused on refined product supply tightness and the transmission of geopolitical shocks.

  Risks

  If geopolitical tensions ease, diesel supply-demand improves, or the curve weakens, the spread position may underperform.

• OECD commercial inventories/SPR

  Oil price support variable

  Strengths

  Global visible inventories are at yearly lows, SPR releases have slowed, and South Korea and Japan have begun restocking.

  Weaknesses

  Inventory support for prices may weaken as the 2027 supply surplus emerges.

  Comparison

  Inventory variables, together with the supply-demand balance table, explain short-term price strength and medium-term price easing.

  Risks

  If restocking falls short of expectations or commercial inventories begin to build again, support for oil prices will decline.

Key data

• 2026Q4 Brent base-case forecast$80/bblUnchanged from the previous forecast, assuming tensions ease in Q4.
• 2026Q4 WTI base-case forecast$76/bblThe report expects WTI to average $76/bbl in 2026Q4.
• 2027 Brent/WTI base-case average price$75/$70 per bblPremised on Hormuz remaining open in 2027.
• Recent oil flow through Bab-al-MandabClose to 9mb/dOf this, around 4mb/d could be difficult to reroute if Hormuz, BaM, and Suez all face shipping frictions simultaneously.
• Yanbu Red Sea port loading volumeAround a high level of 5mb/dIt has remained stable over the past 7 days despite headlines around related frictions.
• Average supply surplus in 20273.2mb/dBased on the Hormuz-open scenario, reflecting lower demand, higher UAE output, and strong Latin American deliveries.
• Global strategic restocking in 20271.2mb/dThe report believes this factor helps limit Brent downside below the high-$60s range.
• Global deficit in 2026Q32.1mb/dThe report expects a sizable deficit in the global oil market in 2026Q3.
• Brent price in the upside scenarioAbove $120/bbl in 2026Q4; 2027 average $100/bblPremised on Hormuz disruptions persisting into 2027.
• Additional upside riskAbout +$25/bblIf shipping disruptions in Hormuz, BaM, and Suez all persist into 2027, prices could rise further relative to the upside scenario.
• Brent price in the downside scenarioLow $60s/bbl by end-2027Brent could fall if supply exceeds expectations and demand losses are more persistent.
• European diesel hedging recommendationGo long Dec26-March27 European diesel/gasoil timespreadUsed to hedge the risk of continued escalation in Middle East and Russian geopolitical shocks.

Impact & implications

For investors, the report conveys an oil price framework that is bullish in the short term but returns to supply surplus in the medium term. Near-term Red Sea and CPC export disruptions, combined with summer inventory draws, may support Brent in holding its gains or even breaking higher; but if key shipping lanes remain open in 2027, the supply surplus will cap the full-year average price. For oil consumers and investors needing to hedge geopolitical risks, the report recommends going long deferred European diesel spreads to hedge sustained disruptions.

Risks

• Continued escalation of Houthi attacks on tankers in the Red Sea, raising the shipping risk premium in Bab-al-Mandab.
• Simultaneous or sustained disruptions in Hormuz, Bab-al-Mandab, and Suez could push oil prices materially above the base-case forecast.
• An escalation in the Russia-Ukraine conflict could cause a further decline in Kazakhstan CPC exports.
• If Middle East production recovers later than expected, 2026H2 supply could come in below the base case.
• If demand in China, South Korea, and the Middle East is weaker than expected, it could offset the price support from supply disruptions.
• If 2027 supply exceeds expectations and demand losses are more persistent, Brent could fall to the low-$60s range by end-2027.
• A rapid easing of geopolitical risks could erode the near-term risk premium.

What to watch

• Whether Houthi attacks on Red Sea tankers continue or expand.
• Whether shipping frictions emerge simultaneously in Bab-al-Mandab, Hormuz, and Suez.
• Whether Saudi Yanbu port loadings continue to hold near the high level of around 5mb/d.
• Whether CPC exports and loadings at the port of Novorossiysk recover.
• Whether Middle East production declines as expected in July 2026 and then recovers in the second half.
• Whether demand data in China, South Korea, and the Middle East continue to come in weaker than expected.
• The pace of draws in global visible inventories and OECD commercial inventories.
• The pace of SPR restocking and releases in South Korea, Japan, and other OECD countries.
• The supply response of U.S. shale oil when oil prices approach or fall below $60/bbl.
• Performance of the Dec26-March27 European diesel/gasoil spread.