Goldman Sachs warns of a surge in oil prices: in extreme cases, Brent crude could break $120 per barrel

Goldman Sachs released a comprehensive deep-dive report on commodities on July 27, providing three oil-price warning scenarios. In an extreme case, if shipping through the Strait of Hormuz continues to be disrupted until 2027, the annual average price of Brent crude will rise above $100, and the year-end in the fourth quarter is even more likely to break through the $120 mark.
(Background summary: Goldman Sachs warned about the “biggest oil crisis in history”: is $110 oil panic at the ceiling or a new normal built on a new foundation?)
(Background add-on: If you don’t go through the Strait of Hormuz, does oil really just not come out? Are there any alternatives?)

Table of Contents

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• Oil price movement recap: the catalyst behind a 12% surge in a single week
• Scenario 1: Baseline neutral — Brent fourth-quarter at $80, full-year average at $75
• Scenario 2: Extreme upside — Strait of Hormuz disruption continues, Brent breaks above $120 in the fourth quarter
• Scenario 3: Downside floor — Brent retraces to $60 by end of 2027
• Goldman Sachs’ new view: structural risk premium

In its latest commodities report, Goldman Sachs laid out three clear scenarios for oil prices, covering a complete range from neutral to extreme. The core conclusion of the report is: upside risks for oil prices are significantly greater than the downside room; in the short term, summer inventory drawdowns will support oil prices being run at high levels.

Oil price movement recap: the catalyst behind a 12% surge in a single week

Brent crude’s front-month contract, over the past week, at one point neared the $100 per-barrel mark, with a week-over-week gain of more than 12%. The factors driving the rally mainly include three things: renewed risk in Red Sea shipping; Houthi militants launching consecutive attacks on tankers passing through; Middle East oil-producing countries delivering on production cuts; and investment banks like Goldman Sachs issuing multiple in-depth commodities reports, breaking down the geopolitical premium.

However, the oil rally has not been smooth all the way. On July 27 at the open, as the U.S. paused weekend airstrikes on Iran, Brent crude briefly slumped 6% to around $91 per barrel, while WTI crude fell below $84, showing traders responded quickly to signals of a ceasefire.

Scenario 1: Baseline neutral — Brent fourth-quarter at $80, full-year average at $75

Goldman Sachs kept its most basic forecast unchanged: assuming easing of geopolitical tensions in the Middle East and gradual restoration of shipping, in the fourth quarter of 2026 Brent crude is $80 and WTI crude is $76.

Looking ahead to 2027, assuming normal traffic through the Strait of Hormuz, Goldman Sachs predicts a full-year average of $75 for Brent crude and $70 for WTI crude. The report specifically notes that the firm’s calculations show global crude oil supply and demand oversupply of 3.2 million barrels per day in 2027; persistent long-term oversupply will weigh on the price center of gravity.

Scenario 2: Extreme upside — Strait of Hormuz disruption continues, Brent breaks above $120 in the fourth quarter

This is the key focus of this report. Goldman Sachs provided two upside scenarios:

Main upside scenario: If shipping through the Strait of Hormuz is disrupted continuously until 2027, and Gulf oil production capacity can only be fully restored by the end of 2027, then Brent crude in the fourth quarter of 2026 could break above $120, and the average for 2027 would stand above $100.

Double-overlay scenario: If the Strait of Mandeb and the Suez Canal are simultaneously and long-term blocked, oil prices would rise an additional $25 per barrel on top of the main upside scenario. This implies Brent crude could move toward an extreme level of $145.

As Goldman analysts noted, the revised assumptions for this scenario are that crude shipments through the Strait of Hormuz would fall to 5% of normal capacity over a period of up to six weeks, and repairs would require an additional month.

Scenario 3: Downside floor — Brent retraces to $60 by end of 2027

Goldman Sachs also provided a downside protection scenario: if global supply surges beyond expectations and energy demand continues to shrink, the lowest Brent crude price by end of 2027 could fall to $60. But the report clearly states that the likelihood of this scenario is low.

Goldman Sachs’ new view: structural risk premium

In addition to the three scenarios, Goldman Sachs also emphasized a structural change: global crude production capacity and spare capacity are highly concentrated in just a few countries, and this concentration trend will lift a longer-term risk premium. The analysts said this dynamic is expected to encourage governments to increase strategic reserves.

For Taiwan, the crude oil import dependency rate is above 95%. For every $10 per-barrel increase in oil prices, a rough estimate suggests additional annual spending of about NT$1.5 billion to NT$2.0 billion. If Brent’s average price rises from $75 to $100, the monthly oil-price burden for Taiwanese households could increase by 500 to 1,000 yuan.