Iran Conflict Drives Oil Price Surge, Strait of Hormuz Remains Key Concern

Oil prices have jumped following recent military actions in the Middle East, particularly strikes within Iran. The extent and duration of potential disruptions to transit through the Strait of Hormuz – a critical waterway for global energy supplies – are now the primary drivers of market volatility, according to analysts at Goldman Sachs.

Strait of Hormuz: A Global Energy Chokepoint

The Strait of Hormuz is a narrow passage through which approximately one-fifth of the world’s oil supply and a significant portion of liquified natural gas (LNG) normally flows. Disruptions to traffic through the strait have an immediate and substantial impact on energy prices worldwide. Currently, about a third of the world’s LNG trade is transported through the Strait of Hormuz.

Goldman Sachs Analysis: Risk Premiums and Price Forecasts

As of March 3, 2026, traders were demanding around $14 more per barrel of oil to compensate for increased risks associated with the conflict, according to Goldman Sachs Research. This risk premium roughly corresponds to the estimated impact of a full four-week halt in flows through the Strait of Hormuz, with spare pipeline capacity offering a partial offset.

Goldman Sachs estimates the impact on oil prices would decrease to an increase of $4 per barrel if half of the flows were halted for one month. However, the firm cautions that prices could rise significantly higher if the market anticipates more persistent supply disruptions.

Price Scenarios

• Full One-Month Closure (No Offsets): $15 increase per barrel
• Full Four-Week Halt (With Pipeline Offsets): Approximately $14 increase per barrel (as of March 3, 2026)
• Half Flows Halted for One Month: $4 increase per barrel

Brent oil, the international benchmark, closed at $77 on Monday, March 3, 2026, up from $72 on Friday and $61 at the end of last year. Goldman Sachs has since raised its oil price forecasts, anticipating a longer and deeper disruption to flows through the Strait of Hormuz.

Updated Forecasts and Potential for Further Increases

Goldman Sachs now models 21 days of low Strait of Hormuz flows at just 10 percent of normal levels, followed by a 30-day gradual recovery, compared to a previous estimate of 10 days. This revised outlook reflects an estimated hit to Persian Gulf exports of 16.2 million barrels per day – the largest oil supply shock on record.

Under this updated framework, Goldman Sachs expects Brent to average $71 in the fourth quarter of 2026, up from a previous forecast of $66. West Texas Intermediate (WTI) is now projected to average $67. The firm as well anticipates a larger policy response and a persistent positioning boost tied to geopolitical risks and investor rotation into hard assets.

In a 60-day disruption scenario, Goldman Sachs models Brent at $93 per barrel and WTI at $89 per barrel. As of March 12, 2026, Brent was trading above $96, while WTI was around $91.50.

European Gas Prices Also Affected

The conflict has also impacted European gas prices. The price of Title Transfer Facility (TTF) futures contracts on the European gas exchange increased by more than 6%, reaching around 49 euros per megawatt hour. Gas prices in the UK also rose by approximately 6%.

Key Takeaways

• The Iran conflict is significantly impacting oil prices due to concerns about disruptions to the Strait of Hormuz.
• Goldman Sachs has raised its oil price forecasts, anticipating a prolonged disruption.
• The extent of the price increase will depend on the duration and severity of any restrictions to transit through the Strait of Hormuz.
• European gas prices are also being affected by the situation.