Goldman Sachs Group Inc predicts that oil flows through the Strait of Hormuz may recover to only about 70% of their pre-war level due to alternative routing strategies adopted by regional producers. According to analysts including Yulia Zhestkova Grigsby in a June 17 note entitled "70 per cent of Pre-War Hormuz Flows Might Become the New 100 per cent," the expected pickup in shipments may be completed by the end of July, with gulf production likely to recover by October. Before the war, approximately 20 million barrels of oil and products used to flow through the strait every day, according to the International Energy Agency. The global oil market is zeroed in on activity in the critical waterway after the US and Iran inked an interim deal to end their war and reopen Hormuz. During the conflict, crude shipments through the trade artery collapsed to a trickle as Teheran and Washington imposed a dual blockade, choking off almost all commercial traffic, initially supercharging crude prices before they retreated. Goldman Sachs Research projects Brent oil will average $75 per barrel next year, down from about $80 at the time of their previous analysis.
During the hostilities, regional producers including Saudi Arabia, the United Arab Emirates and Iraq made increased use of infrastructure that avoided the chokepoint, keeping up vital energy flows to global customers. As reported by Goldman Sachs analysts, Saudi Aramco boosted usage of a cross-country pipeline that routed crude to its Red Sea coast, while the UAE tapped a pipeline to the port of Fujairah, which sits outside Hormuz. Iraq sent oil to the Turkish port of Ceyhan to maintain export capabilities during the conflict. At present, visible flows going through Hormuz were estimated at about 1.3 million barrels a day, with an additional 1.6 million from the Gulf of Oman, which could be linked to so-called dark crossings. At the same time, a total of 7.5 million barrels a day were going through the Red Sea port of Yanbu, as well as Fujairah and Ceyhan. Goldman Sachs Research notes that oil is still at risk of rising due to lingering effects from the conflict, persistently low inventory levels, and the possibility that the Strait of Hormuz never fully reopens.
According to Goldman Sachs analysts, visible flows going through Hormuz were estimated at about 1.3 million barrels a day, with an additional 1.6 million from the Gulf of Oman, which could be linked to so-called dark crossings. At the same time, a total of 7.5 million barrels a day were going through the Red Sea port of Yanbu, as well as Fujairah and Ceyhan. The availability of ships is unlikely to be a constraint on the recovery in flows, with around 860 million barrels of empty tanker capacity positioned in the strait or within five days' of navigation. However, some shipowners may still be averse to sending vessels through the strait, the analysts added. Goldman Sachs Research considers a price downside scenario with Brent at $60 in 2027 in a scenario where the strait reopens more quickly and demand losses are more persistent.
The UAE announced this month it is working on an ambitious plan to try to end its dependence on the chokepoint entirely, expanding its eastern ports of Dibba, Fujairah and Khor Fakkan — which sit outside the strait on the Gulf of Oman coast — and by building at least one new harbor on the same coastline. As reported by UAE's Minister of Foreign Trade Thani Al Zeyoudi, "We're moving toward having zero Hormuz dependency and that's regardless of whether it's open or not." He added, "It's going to open and we hope that will happen quickly, but we will not stop the new plan." Meanwhile, Kuwait is seeking pipeline alternatives to export its crude, with state producer Kuwait Petroleum Corp. in talks with Saudi Arabia and UAE about expanding their pipeline systems to handle Kuwaiti barrels. Chief executive officer Sheikh Nawaf Al-Sabah told a conference that the company is seeking these alternatives to reduce its reliance on the strait. Goldman Sachs Research notes that China has revealed an incredible ability to adjust to the system with significant switching to other energy sources, such as coal and power with a surge in EV volumes, with Chinese import volumes of crude down 4 to 5 million barrels per day year over year.
Oil prices declined to near pre-war levels on Thursday as an agreement was signed between the US and Iran, raising hopes that crude flows through the Strait of Hormuz could gradually return to normal and ease concerns over global supply disruptions. Brent crude slipped below $75 a barrel, while West Texas Intermediate traded near $74, extending a sharp pullback that has erased most of the gains triggered by the conflict earlier this year. President Donald Trump said the agreement had been signed and would pave the way for a rapid reopening of the Strait of Hormuz, one of the world's most important energy chokepoints. While the agreement marks a major step toward restoring trade flows, the energy industry remains cautious as oil companies, traders and shipowners are waiting for greater clarity on operational details before fully resuming activity in the region. However, there are early signs of movement, with some vessels starting to reroute toward the Middle East and Iranian tankers loaded with crude beginning to leave ports. Iraq, the second-largest oil producer in the region, has also indicated it is preparing to increase exports as supply routes reopen, with market participants expecting additional barrels from Gulf producers to gradually return to global markets over the coming weeks.
