Why Oil Prices Are Down Today and What Goldman Sachs Predicts Next

Oil prices pulled back on Monday after several days of extreme volatility tied to the escalating conflict in the Middle East. The earlier surge had been driven by fears that the war could severely disrupt shipments through the Strait of Hormuz. When flows through that critical chokepoint appeared to stall, crude prices climbed rapidly as investors began pricing in the possibility of a prolonged supply shock.

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The Strait of Hormuz plays a central role in the global energy system. Roughly one-fifth of the world’s seaborne oil passes through the narrow waterway connecting the Persian Gulf with international markets. Any interruption to traffic there immediately raises concerns about supply availability, transportation routes, and the potential for higher energy costs across the global economy.

Recent data, however, suggested the disruption may not be as absolute as initially feared. While tanker movements through the strait have been severely reduced, some cargoes continue to move and certain shipments still appear to be reaching international markets. That partial flow helped calm some of the most extreme scenarios that had begun circulating in energy markets during the past week.

As a result, crude prices gave back a portion of their earlier gains. Brent crude eased toward roughly $101 per barrel while U.S. benchmark West Texas Intermediate moved into the mid-$90s, stepping back from the peaks reached during the height of the geopolitical anxiety.

However, the Strait of Hormuz remains far from operating normally, and the global oil market still faces the possibility of a meaningful supply shortfall if disruptions persist. That uncertainty is central to how Goldman Sachs views the situation. Commodities strategist Daan Struyven believes the market is still grappling with a severe supply disruption tied to the Strait of Hormuz, and estimates that exports from the Persian Gulf have already fallen by about 16.2 million barrels per day as flows through the strait dropped to roughly 10% of normal levels.

Because of that disruption, Struyven expects oil prices to carry a meaningful geopolitical premium in the near term. The strategist points out that the market may require “a large risk premium” to trigger enough demand destruction to prevent inventories from falling toward critical levels if the disruption lasts longer than expected.

Looking ahead, Struyven assumes that shipping flows through the Strait of Hormuz begin recovering after March 21, allowing prices to gradually converge toward Goldman’s “after-the-shock” pricing framework. Still, he cautions that risks remain skewed higher. If flows through the strait remain depressed for longer than expected, oil prices could climb well beyond current levels before supply adjustments and policy responses begin restoring balance.

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