On March 7th, according to news from the Wind Trading Platform, Goldman Sachs' commodity research team quietly &#34;overturned&#34; its previous optimistic expectations in the latest oil report released on March 6th. The bank's earlier baseline scenario was based on the assumption that traffic through the Strait of Hormuz would &#34;begin to gradually return to normal in the coming days.&#34; However, the latest data shows that the reality is far more severe than expected.
Goldman Sachs clearly stated: If there are no signs of traffic normalization in the Strait in the coming days, oil price forecasts will be revised immediately. More critically, the report pointed out that upside risks are &#34;rapidly expanding&#34;, and it directly provided price judgments under extreme scenarios:
<blockquote>
If there are no signs of a solution within this week, oil prices are likely to exceed $100 next week; if traffic through the Strait remains sluggish throughout March, oil prices (especially refined oil) will surpass the historical peaks of 2008 and 2022.
</blockquote>
The research report noted that the upside risks for energy assets are accumulating at an unprecedented rate, and Goldman Sachs provided four major reasons that are gradually undermining the foundation of the previous &#34;rapid recovery&#34; assumption.
<h2>Reason One: The decline in Strait traffic far exceeds expectations, the reality is worse than the assumption</h2>
Goldman Sachs estimates that the normal oil flow through the Strait of Hormuz is about 20 million barrels per day (20mb/d), of which crude oil and condensate account for about 14 million barrels per day, refined oil about 4 million barrels per day, and liquefied natural gas (NGL) about 2 million barrels per day.
However, the current actual data is shocking: The average daily flow through the Strait has decreased by about 90% from normal levels, a reduction of about 18 million barrels per day (18mb/d).
This figure is below Goldman Sachs' baseline assumption of a &#34;decline of 85% (i.e., about 15% of normal levels)&#34; this week. In other words, the reality is even worse than Goldman Sachs' pessimistic assumption. This means that the risks surrounding the baseline scenario have further tilted towards &#34;lower flow, lasting longer.&#34;
<h2>Reason Two: The ability to reroute through alternative pipelines is severely insufficient, actual redirection is only 0.9mb/d</h2>
In the face of the Strait blockade, the market had hoped for pipelines and alternative ports to fill the gap. Theoretically, Saudi Arabia's east-west pipeline (to the Red Sea port of Yanbu) and the UAE's Habshan-Fujairah pipeline (to the Gulf of Oman) are estimated to have a combined spare capacity of less than 4 million barrels per day (3.6mb/d).
However, Goldman Sachs' actual tracking data shows that in the past four days, the net redirected flow through the pipelines and the ports of Yanbu (Red Sea, Saudi Arabia) and Fujairah (Gulf of Oman, UAE) only increased by about 900,000 barrels per day (0.9mb/d), far below the theoretical limit.
The reasons for this significant gap are multiple:
<blockquote>
<ul>
<li>
Attacks on Fujairah port and oil storage facilities this week directly impacted alternative export capacity;
</li>
<li>
Local shortages of marine fuel (usually imported from the Persian Gulf via the Strait of Hormuz) led to tankers being unable to operate normally;
</li>
<li>
Previous attacks on pipelines further compressed redirection potential
This means that the market expectation of &#34;pipeline bottoming&#34; is severely overestimated, and the actual buffering capacity is extremely limited.
</li>
</ul>
</blockquote>
<h2>Reason Three: Quick solutions are not necessarily imminent, and shippers are in a wait-and-see mode</h2>
Goldman Sachs found through communication with market participants that most shipowners are currently in a &#34;wait-and-see&#34; mode, primarily due to the still very high physical risks in the Strait.
It is worth noting that Goldman Sachs' analysis excludes the assumption of &#34;insurance costs&#34; as the main reason for the sharp decline in traffic. Data shows that there are still some insurance options available, and from a purely economic perspective, voyages through the Strait remain profitable against the backdrop of sharply rising freight rates—even though the war risk premium has significantly increased (currently about 3%, with a historical high of 7.5% during the Iran-Iraq War in the 1980s).
This finding points to a more concerning conclusion: the core factor preventing ships from passing is physical safety risk, not economic cost. As long as the physical risk is not eliminated, no matter how strong the economic incentives are, they cannot drive the recovery of traffic.
Goldman Sachs outlined three possible paths for the recovery of traffic through the Strait:
<blockquote>
<ol>
<li>Overall de-escalation of the conflict (complete ceasefire or diplomatic resolution);</li>
<li>The U.S. providing strong escort protection for tankers;</li>
<li>Iran allowing tankers from specific sources/destinations (including China) to pass safely.</li>
</ol>
</blockquote>
From the statements of various parties (see the table below), expectations for the duration of the conflict range from 10 days to over a month, with significant divergence, further exacerbating market uncertainty:
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/91a1e188-9427-45a6-a0ff-4c504f1aaadb.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/91a1e188-9427-45a6-a0ff-4c504f1aaadb.png"/>
<h2>Reason Four: The scale of the supply shock is unprecedented, and demand destruction pricing will arrive faster than in history</h2>
Goldman Sachs emphasizes that the scale of this supply shock has no historical precedent.
The total shock to Persian Gulf oil supply has reached 17.1 million barrels per day (17.1mb/d)—this figure is 17 times the decline from the peak production level of Russia in April 2022. Meanwhile, total oil exports from the Persian Gulf have currently decreased by 74% from normal levels, leaving only about 6 million barrels per day.
Goldman Sachs points out that due to the unprecedented scale of the shock, the market will begin to price in &#34;demand destruction&#34; faster than historical experience and simple models suggest, for two reasons:
<blockquote>
<ol>
<li>Rapid inventory consumption: The larger the shock, the more the market will begin to price in demand destruction while inventory levels are still relatively high, rather than waiting until inventories truly bottom out;</li>
<li>Accelerating factors overlap: Consumer stockpiling behavior, as well as non-OECD countries reducing refined oil exports (such as China reducing oil product exports to ensure domestic supply), will further accelerate the consumption rate of OECD inventories.</li>
</ol>
</blockquote>
<h2>The essence of Goldman Sachs' &#34;tear report&#34;: the baseline assumptions are being pierced by reality</h2>
The key to understanding this report lies in contrasting it with Goldman Sachs' previous optimistic expectations
According to a previous article from Wall Street Insight, Goldman Sachs' strategy team has been bullish against the market turmoil, believing that this pullback presents a buying opportunity. One of the core support logics is the optimistic expectation of &#34;normalcy restored around the Strait of Hormuz.&#34; Goldman Sachs' chief oil strategist Daan Struyven previously set the path as follows: Strait traffic maintaining about 15% of normal levels for an additional 5 days, then recovering to 70% within two weeks, and finally achieving 100% normalization in another two weeks.
Based on this assumption, Goldman Sachs raised its second-quarter average price forecast for Brent crude to $76 per barrel, WTI to $71 per barrel, and increased its Brent forecast for Q4 2026 from $60 to $66.
However, the report dated March 6 actually has Goldman Sachs publicly questioning its own assumptions with the latest data:
<blockquote>
<ul>
<li>Actual traffic (about 10% of normal levels) is below the assumption (15%);</li>
<li>Alternative redirection (0.9mb/d) is far below theoretical potential (3.6mb/d);</li>
<li>Quick solutions are not necessarily imminent;</li>
<li>The scale of the shock has exceeded all historical comparable scenarios.</li>
</ul>
</blockquote>
Goldman Sachs clearly stated, if there is no evidence of Strait traffic beginning to gradually normalize in the coming days, it will quickly revise its oil price forecasts. This is essentially a warning to the market: a more aggressive upward revision report may arrive at any time.
However, Goldman Sachs also pointed out that if the U.S. escort plan or diplomatic efforts are effective, and Strait traffic recovers quickly, the current risk premium will evaporate rapidly, and Brent prices may face a significant drop of $12 to $15 per barrel.
According to research reports, there have been 12 oil tankers attacked in the Strait of Hormuz and surrounding waters (from March 1 to 6), and so far there have been no confirmed attacks on Asian-flagged tankers—this detail may be one of the important variables affecting the situation's direction.

Goldman Sachs overturned its previous optimistic expectations, pointing out that the flow through the Strait of Hormuz has decreased by more than 90%, worse than assumed; alternative pipeline redirection is only 0.9 mb/d, far below theoretical values; supply shocks are unprecedented. The upward risk for oil prices is "rapidly expanding," and if there are no signs of recovery within this week, oil prices may exceed $100 next week; if March remains sluggish, oil prices will surpass the historical peaks of 2008 and 2022

- On March 6, Goldman Sachs reported that their previous optimistic oil flow assumptions for the Strait of Hormuz have been significantly undermined by current realities.  
- The actual oil flow has decreased by approximately 90%, far worse than their earlier projections, prompting a warning that oil prices could exceed $100 next week if no normalization occurs.  
- The report illustrates unprecedented supply shocks, with total disruptions reaching 17.1 million barrels per day, leading Goldman Sachs to reconsider their price forecasts unless evidence of recovery surfaces soon.

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Goldman Sachs "tears up the report": If the Strait of Hormuz does not "recover as scheduled" in the coming days, the "huge upside risk" for oil prices will rapidly expand