Iran's 'Willingness' is Key Constraint on Oil Supply, Not Tankers, Goldman Sachs Says

Renewed hostilities between the U.S. and Iran are the main constraint on the recovery of oil flows through the critical Strait of Hormuz, with Iran's posture being a greater obstacle than transportation capacity, according to analysts at Goldman Sachs. The assessment follows a series of tanker attacks and retaliatory military strikes that have pushed global oil prices higher.

Tensions Stall Waterway Recovery

Recent escalations, including drone attacks on one LNG tanker and two oil tankers, prompted the U.S. to revoke a sanctions waiver on Iranian oil sales and conduct military strikes. Iran responded with its own strikes, leading to a volatile security situation that has caused Spot Brent futures to climb to around $80 a barrel.

In a research note, Goldman Sachs strategists led by Yulia Zhestkova Grigsby stated, "The recent attacks on tankers highlight still elevated risks of crossing, and shippers may hesitate to cross under the currently unclear ceasefire status, weighing on near-term Hormuz flows." This uncertainty has reversed a promising recovery, with oil flows from the Persian Gulf falling back to the low-70s percentage of normal levels, or 16-17 million barrels per day (bpd).

A 'Willingness' Bottleneck

The strategists argue that the primary bottleneck is geopolitical, not logistical. They support this view by highlighting key data points:

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• Flows specifically through the Strait of Hormuz have fallen to 8.3 million bpd, down from a recent peak of 10 million bpd.
• Empty oil tanker capacity inside the Gulf is more than 50% higher than loaded volumes, indicating ample available shipping.

This evidence suggests that "Iran’s willingness, rather than lack of transportation capacity, is the main constraint for a swift flows recovery," the Goldman note said. The analysis also pointed out that Persian Gulf crude production in June remained down 10.5 million bpd compared to pre-conflict levels, with Saudi Arabia, Iraq, and Kuwait representing most of the shortfall.

Outlook and Broader Market Pressures

Goldman Sachs outlined a scenario where a continuation of 60-day negotiations, a reinstated U.S. waiver, and security guarantees for shippers could allow Persian Gulf flows to normalize by the end of July. However, a less likely alternative in which talks collapse could see tanker attacks escalate and flows "decrease further."

Compounding the supply-side concerns, the bank also noted significant pressure from Russia, where refinery outages have surged to 3.8 million bpd. This disruption has contributed to a sharp rise in diesel margins, with the European premium over Brent hitting $60 a barrel and the U.S. margin reaching $75 a barrel.