Oil Comment: Hedging Escalation With Diesel Length

Research evidence excerpt

Oil Comment: Hedging Escalation With Diesel Length

Commodities Research

20 July 2026 | 9:30PM EDT

n Lower Gulf flows means higher prices. Escalation in the Middle East and the Daan Struyven

+1(212)357-4172 |

decline in estimated Persian Gulf flows to below 45% of pre-war levels have daan.struyven@gs.com

Goldman Sachs & Co. LLC

pushed oil prices back up (Exhibit 1). The Brent futures curve is now modestly

Yulia Zhestkova Grigsby

above our $80/75 forecasts for 2026Q4/2027, which assume de-escalation in +1(646)446-3905 | yulia.grigsby@gs.com

2026Q4. Goldman Sachs & Co. LLC

Alexandra Paulus

n Upside price risks. We see risks to our price forecast as tilted to the upside on +1(212)902-7111 |

alexandra.paulus@gs.com

net, especially in the near term (Exhibit 2). The key upside price risks are: Goldman Sachs & Co. LLC

Filippo Cuscito o Shipping disruptions in Hormuz—and potentially the Red Sea—as the +44(20)7051-9073 |

estimated 5mb/d rise since the start of the war in pipeline flows via Yanbu filippo.cuscito@gs.comGoldman Sachs International

to the Red Sea, to more than 6mb/d (Exhibit 3), has played a key role in

offsetting part of the decline in Hormuz flows.

o Damage to energy infrastructure from the Middle East and Russia-Ukraine wars.

While the Iran war has likely not caused lasting major damage to oil

production capacity so far, our analysis of the 5 largest prior supply shocks

shows an average 42% hit to production in the affected country after 5

years, often reflecting infrastructure damage, underinvestment, or tight

sanctions (Exhibit 4).

n Lower stocks vs. greater flexibility. Brent might exceed $120/bbl in 2026Q4

and average $100 in 2027 if Hormuz remains disrupted through 2027 (Exhibit 2,

red line). This scenario assumes Gulf output only fully recovers by Dec27,