Goldman Sachs has put a number on how severe the Strait of Hormuz standoff could become for oil markets, and the bank has already raised its base-case forecasts to move closer to that scenario.

The stakes are unusually high because the Strait of Hormuz is the world's most important oil chokepoint: roughly a fifth of globally traded petroleum liquids passes through the narrow waterway between Iran and Oman, meaning any sustained disruption there affects buyers well beyond the region.

The bank laid out a wide range for where oil prices could head depending on how the dispute plays out, flagging a potential rally to $120 a barrel if attacks on Middle East shipping intensify, against a lower target of $80 should exports from the region normalize. Brent was last trading near $97 when Goldman's commodities team made the call. That roughly $23 spread either side of spot underscores how binary the near-term outlook remains.

Goldman lifted its Brent and WTI price forecasts by $5 to $85 and $80 respectively for December 2026, and to $80 and $75 for 2027 — a move that signals the bank sees the balance of risk skewed toward the upside scenario rather than normalization. The bank also flagged that Brent could climb past $120 a barrel if average Gulf output through 2027 stays roughly 4 million barrels a day below pre-war levels.

Daan Struyven, Goldman's co-head of global commodities research, said the risk of shipping disruptions broadening and intensifying has become more significant given recent developments.

Crude has climbed to its highest level since July as the United States and Iran remain locked in a standoff over the strait. Washington has struck Iranian tankers, Tehran has declared a new restricted zone outside the waterway, and American naval forces continue to blockade Iranian ports while escorting other producers' vessels through the region.

Rather than expressing that geopolitical risk through crude itself, Goldman is recommending investors position via long positions in natural gas and diesel, arguing the supply shocks in those markets are larger than in crude. The bank's preference for products and gas over crude is notable, since it implies Goldman sees the biggest supply shock currently priced into product and gas markets rather than crude — a distinction that matters for how the risk shows up across the energy complex rather than just at the crude headline level.

Diesel prices have more than doubled this year, with gains across natural gas and refined products broadly outpacing crude since the conflict escalated more than six months ago. For consumers and freight-dependent industries, diesel is the fuel of trucking, shipping and agriculture, so sustained strength there feeds through quickly into transport and logistics costs.

Goldman also expects China to continue acting as a stabilizing force in the crude market specifically, reining in imports in response to elevated prices. Struyven noted that Beijing has not taken on this role in natural gas or refined products. That distinction leaves the product and gas markets more exposed to the upside scenario Goldman is flagging, even as crude itself benefits from at least some demand-side cushioning from China's buying behaviour.

Among the signals worth watching from here: whether Gulf export flows and shipping traffic through the strait deviate further from pre-war levels, and whether other major banks follow Goldman in marking their oil forecasts toward the upper end of the range.

Earlier coverage of the escalation is available here: Oil jumps at reopen on Saudi strikes, Iran threat to Gulf energy assets.