Goldman Sachs Lifts Long-Term Oil Forecast to $76 on Middle East Risk Premium

Goldman Sachs has raised its long-dated oil price forecast by $9 to $76 per barrel, citing an increased structural security premium amid heightened geopolitical tensions in the Middle East. The bank stated in a Monday note that the recent rally, fueled by tanker attacks and U.S.-Iran military strikes, underscores the critical importance of oil flows through the Strait of Hormuz.

Geopolitical Risks Drive Upgrade

According to the bank's analysts, the recent conflict demonstrates how vulnerable oil prices are to disruptions in the Strait of Hormuz in the short term. This has led Goldman to incorporate a higher risk premium into its long-term price assumptions.

The firm cautioned, however, that a serious re-escalation of the conflict could intensify the short-run upside risk to oil prices even further.

Pipeline Expansion May Cap Long-Term Prices

While near-term risks have increased, Goldman Sachs identified a significant long-term factor that could reduce the region's vulnerability. The bank highlighted the eventual expansion of pipeline capacity across the Middle East designed to bypass the strategic chokepoint of Hormuz.

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Goldman projects that new pipeline capacity will be sufficient to insulate a substantial portion of the region's oil exports from potential disruptions in the strait. The key forecasts include:

• Over 45% of pre-war Persian Gulf export levels could be insulated by the end of 2027.
• This figure is expected to rise to more than 60% by the end of 2028.

Future Capacity Scenarios

In its base case, Goldman forecasts that effective pipeline capacity will increase by an additional 3.8 million barrels per day by the end of 2027, rising to a cumulative 7.3 million barrels per day by the end of 2028. This projection is based on seven pipelines that are either under construction, in planning, or under consideration.

Analysts noted that historical data suggests single-country pipelines in the Middle East are built relatively quickly, with a median construction time of 2.5 years. Under an accelerated scenario, pipelines could insulate 75% of exports by the end of 2028, while a more conservative outlook still implies just over 45%.