Goldman: Oil Has Peaked, APAC Inflation Pressure Easing
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Goldman: Oil Has Peaked, APAC Inflation Pressure Easing
With heightened expectations of a reopening of the Strait of Hormuz and falling global oil prices, Goldman has cut its Brent price forecast to $80/barrel, signaling that import-driven inflation pressures in the Asia-Pacific are likely to ease materially in the near term, with inflation risks skewed to the downside.
- Goldman lowered its Q4 Brent price forecast from $90/barrel to $80/barrel.
- Increased expectations of a reopening of the Strait of Hormuz have driven a sharp decline in global oil prices recently.
- Asian import and producer prices surged sharply since early 2026 but are expected to ease materially in the next update.
- Lower-income economies such as the Philippines and Thailand face acute inflation pressures, though May's month-on-month inflation moderated.
- Wage inflation in high-income APAC economies (excluding Japan) remains weak or stable.
Report interpretation
Overview
This report by Goldman Sachs Global Investment Research provides an Asia-Pacific inflation monitor, tracking the latest CPI/PPI data (mostly through May 2026) and select energy price data (through mid-June) across Greater China, India, Japan, ASEAN, and Australia/New Zealand. The central thesis is that the energy price shock driven by geopolitical tensions (Iranian conflict and the closure of the Strait of Hormuz) has peaked. As conditions normalize, oil prices have fallen sharply, and import-driven inflation pressures in the region are expected to ease materially over the coming months, with inflation risks skewed to the downside.
Core views
Energy price shock has peaked and reversed: The disruption to energy supplies caused by the Iranian conflict and the closure of the Strait of Hormuz had previously pushed Asian import and producer prices higher. However, with a recent decline in global oil prices and heightened expectations of a reopening of the Strait, the peak of the energy price shock has passed. Goldman's commodities team has cut its Q4 2026 Brent price forecast from $90/barrel to $80/barrel. While refined products remain above pre-war levels, they have also declined. Inflation landscape and divergence: Across the region, overall and core CPI inflation rates are largely within or just above central bank targets. Pre-war, most countries' inflation aligned with or undershot targets. Low-income economies (e.g., Philippines, Thailand), constrained by limited subsidy capacity, face acute inflation pressures, with seasonally adjusted 3-month annualized CPI above 10%. However, month-on-month inflation moderated in May. In contrast, wage inflation in high-income APAC economies (excluding Japan) remains weak or stable, while Japan stands apart. Inflation expectations are converging with risks skewed to the downside: Following the conflict, market and Goldman's CPI forecasts for the region were raised. But with energy prices having fallen from peak levels for some time, forecasts have converged. The report argues that inflation risks are now skewed to the downside.
Analysis framework
The report employs a standard macro data tracking and transmission framework. It starts with upstream commodity (crude) price movements, analyzing how geopolitical events (conflict, strait closure) impacted supply and drove prices higher. It then tracks import price indices and producer price indices to assess cost transmission to midstream. Next, it combines CPI data (headline and core) across economies to gauge consumer inflation, paying special attention to the role of subsidies in smoothing retail fuel prices. Finally, it evaluates wage inflation to assess second-round effects, informing the overall inflation outlook.
Methodology notes
Transmission from crude prices to import/producer prices to CPI
The report analyzes how changes in crude oil prices cascade through import costs, producer prices, and ultimately into consumer prices (CPI), helping to gauge the persistence and lags of inflationary pressures and distinguish between supply-driven and demand-driven inflation.
Imported inflation and the buffering role of subsidies
The report highlights the impact of external energy price shocks on Asian economies and notes that some countries use explicit or implicit subsidies to limit retail fuel price increases, thereby dampening CPI volatility. This underscores the need to consider policy interventions when analyzing inflation in open economies.
Key data
- Brent Price Forecast (2026 Q4)$80/barrelDown from $90/barrel, reflecting reopening expectations and recent price declines
- Philippines/Thailand 3-Month Annualized CPI (SA)>10%Acute inflation pressure in lower-income economies, with May m/m easing
- Median Headline CPI (Region)3%Overall inflation level across the Asia-Pacific
Impact & implications
For the Asia-Pacific, the decline in energy prices should curb cost pressures for firms and households, supporting consumer confidence and facilitating a normalization of monetary policy. For oil-import-dependent economies, terms of trade will improve. While inflation remains above targets in some countries, the report suggests that with the energy shock fading, inflation is likely to return to target bands, reducing the need for further tightening and potentially opening the door to future easing.
Risks
- The reopening of the Strait of Hormuz proceeds more slowly than expected, prolonging supply constraints.
- Escalation of geopolitical tensions triggers fresh supply shocks.
- Wage-price spirals emerge, particularly in economies with sticky core inflation.
What to watch
- Upcoming movements in Asian import and producer price indices.
- Actual navigation status of the Strait of Hormuz and changes in global crude inventories.
- Central bank commentary on core inflation and wage trends and policy actions.