Goldman Sachs pegs $25 war premium on Brent, sees $90 by end-2026 and $80 in 2027

According to Goldman's calculations, Brent crude is currently priced significantly above what pure supply-demand fundamentals would suggest, making it susceptible to a steep decline if geopolitical escalation risks diminish, while also leaving it at risk of a surge if the conflict intensifies. The bank's projected trajectory sees prices declining over time, as it forecasts a market surplus starting in the fourth quarter of 2026, which should bring prices down to around $80 by 2027, aligning with UBS's prediction that Brent will reach $80 next summer. In the near term, prices are supported by low inventories, such as the US Strategic Petroleum Reserve at its lowest point since 1982, and by investors buying oil as a hedge against stock and bond market moves. For markets sensitive to inflation, a reduction in the risk premium would alleviate pressure on central banks and bond yields, whereas a renewed spike would strengthen the case for hawkish monetary policy.

---

Prior coverage:

• The US Strategic Petroleum Reserve sank to its lowest since 1982 as releases linked to the Iran war depleted stockpiles

---

Goldman Sachs states that approximately $25 per barrel of Brent represents a wager on further escalation of the Iran conflict; if that wager fails, the bank expects prices to gradually return to around $80.

Highlights:

• Goldman calculates that Brent's spot price carries close to $25 per barrel of risk premium above fair value, due to the potential for supply reductions and inventory depletion if the Iran conflict intensifies.
• The bank increased its forecast for December 2026 Brent to $90 per barrel from $85, and anticipates an average price of $80 in 2027.
• Exports from the Persian Gulf have rebounded to near their 2025 average since late September, including roughly 4 million barrels per day of untracked shipments.
• The global oil market was nearly balanced in September, with a deficit of 0.3 million barrels per day compared to 7.2 million in March; Goldman forecasts a surplus from the fourth quarter.
• Very low inventories, restocking demand, and oil's role as a portfolio hedge are still propping up prices.
• The main upside risk is further escalation involving Iran or the Houthis that strikes oil facilities.

According to Goldman, Brent is trading with a risk premium of close to $25 per barrel above fair value, as markets account for the possibility that the Iran war might intensify and again disrupt supplies, despite the recovery in Gulf exports.

In a research note released on Friday, Goldman increased its December 2026 forecast for Brent from $85 to $90 per barrel, while keeping its projection that prices will ease to an average of $80 in 2027. Daan Struyven, co-head of global commodities research at Goldman Sachs, connected the risk premium to the potential for further supply constraints and inventory draws if the conflict escalates.

Goldman's underlying supply outlook has improved considerably. The bank said that Gulf exports have returned to roughly their 2025 average since late September, with an estimated 4 million barrels per day of so-called dark exports — shipments that go undetected by normal tracking. It expects Gulf production to continue to increase as exporters adjust and expand transportation, especially pipelines and tankers.

Consequently, the global oil market is now nearly balanced. Goldman calculates that the deficit fell to 0.3 million barrels per day in September from 7.2 million in March, and anticipates a surplus starting in Q4 2026 and continuing through 2027. The bank cites that transition as the primary reason for its anticipated price ease.

Demand has also suffered a major blow. Goldman reported that consumption dropped by 3.3 million barrels per day in Q3 year-over-year, primarily in China, the Middle East, and OECD Asia. It expects most of that decline to be regained by late 2027, though a permanent move toward EVs in China will likely leave demand lower than its pre-shock trajectory.

Several factors are currently keeping prices high. World inventories are near historic lows, fueling strong restocking demand, and investors have been purchasing oil as a hedge against equity and bond movements. Emergency reserves have also been depleted, with the US Strategic Petroleum Reserve reaching its lowest point since 1982 last week.

Goldman views the risk balance for its projections as skewed to the upside. A fresh escalation involving Iran or the Houthis that hits ports, pipelines, or oil facilities in the area would pose a major upside risk to prices, according to the bank.

The fate of the risk premium largely hinges on the conflict's trajectory, with the speed of Gulf export recovery being the main metric to monitor.