Goldman Sachs has warned that escalating tensions around the Strait of Hormuz could disrupt global oil flows, potentially leading to shortages and heightened volatility in energy markets worldwide.
The narrow waterway between Oman and Iran, the Strait of Hormuz, serves as the world's most important oil transit point, which facilitates the passage of 20 million barrels of oil per day.
Countries running out of oil soon is a real possibility as the US-Israeli war on Iran continues to leave the critical Strait of Hormuz effectively closed.
"As the last tankers that crossed the Strait of Hormuz before the war are reaching their destination, concerns about potential oil shortages are rising," Goldman Sachs strategist Daan Struyven wrote in a new note.
Struyven added, "Our three-way analysis highlights already critically low supplies of petrochemical feedstocks, naphtha and LPG, in Asia, with cross-product scarcity in multiple Asian countries in April. Some remaining flows from the Strait of Hormuz, along with alternative imports, export restrictions, and domestic oil stocks, can soften the impact of a Hormuz shock on gasoline and diesel; however, the risks of fuel oil and naphtha shortages remain high, especially in Asia.”
Over the past two weeks, oil prices have experienced extreme volatility, recently surging to their highest levels since the military campaign began in late February.
After a brief dip below $100 in late March due to short-lived hopes of a de-escalation, prices spiked sharply following President Trump's primetime address on April 1. During that speech, the president pledged to hit Iran "extremely hard" over the next two to three weeks, effectively signaling that there is no near-term exit from the conflict.
US President Donald Trump again ratcheted up the war rhetoric over the weekend, which could put upward pressure on oil prices and leave the Strait of Hormuz hanging in the balance.
“Open the F***in’ Strait, you crazy bastards, or you’ll be living in Hell,” Trump wrote in a Truth Social post, warning of dire consequences if Tehran does not reestablish maritime transit before the set deadline on Monday.
“Tuesday will be Power Plant Day, and Bridge Day, all wrapped up in one, in Iran,” Trump said in his message on the social media platform.
Goldman Sachs said diesel and jet fuel had seen the sharpest rally globally, with average increases of roughly $130–140 per barrel, or about 150%, since late February.
"For markets, the flow of oil (transit through the Strait) matters more than the stock of oil (energy infrastructure to produce it) because flow keeps the global economy going, given that the oil market pre-conflict was close to being overstocked (i.e., oversupplied)," Fed Watch Advisors founder Ben Emons explained.
"To that effect, Strait reopening works like the pandemic reopening and has characteristics priced into financial markets, such as being a form of quantitative easing (which was inherently more about flow than stock)," he added.