Goldman Sachs Warns Oil Could Surge Past $120 if Strait of Hormuz Disruptions Persist

The Quick Take

• Goldman Sachs warned that oil prices could surge past $120 per barrel if Strait of Hormuz disruptions from the US-Iran conflict continue beyond the near term.
• Brent crude had already climbed back above $91 per barrel in July as renewed US-Iran fighting disrupted market expectations for stable Middle East supply.
• A $120 scenario would represent a 25-30% increase from pre-conflict levels, with severe consequences for oil-importing economies in Asia including India, Japan, and South Korea.

Goldman Sachs' $120/bbl warning for Brent crude reflects the structural vulnerability of global oil supply to Strait of Hormuz disruption. Approximately 20% of global oil trade — roughly 17 to 20 million barrels per day — passes through the Strait, making it the world's most critical energy chokepoint. A sustained closure or significant degradation of transit capacity would force buyers to reroute shipments via the much longer Cape of Good Hope route, adding weeks to delivery times and triggering a supply shock of a magnitude not seen since the 1970s oil embargo.

The bank's analysis likely incorporates the existing disruption in Red Sea shipping lanes where Houthi attacks have already forced many tanker operators to avoid the Suez Canal route. With both the Hormuz and Red Sea corridors facing simultaneous threat, the global oil logistics system is under stress from multiple directions. Goldman's forecast assumes the conflict remains bounded to current intensity; an escalation involving Iranian-backed proxies targeting Gulf Arab oil infrastructure would push the upside scenario beyond $120/bbl.

For India, the world's third-largest oil importer at approximately 85% import dependency, a $120/bbl scenario would add roughly 2-2.5 percentage points to the current account deficit and force the RBI to reassess its rate trajectory. Indian equity markets have already been pricing in a bearish oil shock, with the Nifty down sharply on Wednesday. The Goldman warning adds institutional credibility to the downside risk that was previously treated as tail risk by domestic market consensus, suggesting a sustained risk premium on oil-sensitive Indian stocks through Q3 2026.

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