In its newly released commodities research report, Goldman Sachs pointed out that if the U.S.-Iran conflict leads to sustained disruption in the Strait of Hormuz, Brent crude oil prices could break above $120 per barrel in the fourth quarter, with average prices potentially reaching $100 in 2027. Even under a de-escalation scenario, the oil price floor would remain in the comfortable $75-to-$80 range — a dual tailwind for oil majors.
Goldman Sachs analysts outlined two pathways in their report. The base case assumes that the U.S. and Iran achieve de-escalation by the end of the year. Despite recent exchanges of attacks between the two sides, media reports indicate that mediators have presented Iran with a new proposal that includes a 10-day ceasefire, offering a glimmer of hope for restarting peace talks. Under this assumption, Goldman expects Brent crude to average $80 per barrel in the fourth quarter of 2026, before easing further to $75 per barrel in 2027.
However, Goldman simultaneously emphasized that upside risks to oil prices are accumulating rapidly. According to the bank’s estimates, oil tanker traffic through the Strait of Hormuz has nearly ground to a halt since the escalation of the conflict, with average flows over the past month plunging 45% below pre-war levels. If this situation extends into 2027 and Persian Gulf production fails to recover before year-end — when additional alternative pipeline capacity is scheduled to come online — then Brent prices could surge past $120 per barrel in the fourth quarter, with full-year 2027 averages standing above the $100 mark.
Oil Giants Benefit in Either Scenario
For oil producers, Goldman Sachs’ two scenarios lead to the same destination. Under the base case, the $75-to-$80 oil price range is already more than sufficient to support robust cash flows and shareholder returns. Take Chevron (CVX) as an example. The company previously projected that at $70 oil, it would generate an additional $12.5 billion in free cash flow this year, fueled by its merger with Hess, recently completed expansion projects, and cost-saving initiatives. Given that oil prices have already climbed above $90 and in light of Goldman’s price outlook for the second half of the year, Chevron’s actual performance is set to far surpass that projection. More notably, even at $70 oil, Chevron is still expected to maintain a compound annual free cash flow growth rate of more than 10% through 2030.
Another oil giant, ExxonMobil (XOM), is equally resilient. The company has achieved cumulative structural cost savings of $15.6 billion since 2019, with a target of reaching $20 billion by 2030. At the same time, Exxon continues to invest heavily in its highest-return, highest-margin assets. The company expects that by 2030, these initiatives will contribute $25 billion in earnings growth and $35 billion in cash flow growth, assuming prices and margins remain at 2024 levels. Even under a low-oil-price scenario of $65 Brent, Exxon would still generate $145 billion in surplus free cash flow over this period. Under Goldman’s base case, that figure would expand even further.
The Investment Case for Oil Stocks
The status of traffic through the Strait of Hormuz has become the single largest variable for near-term oil price movements. Goldman’s report clearly outlines two possibilities — but in either case, both point to a favorable pricing environment for oil companies. In the current context of heightened geopolitical uncertainty, oil stocks offer the dual appeal of delivering solid returns under the base case while retaining significant upside potential should geopolitical risk premiums climb further. For investors seeking a favorable risk-reward balance, this asymmetric return profile is precisely what makes oil stocks most compelling at the current juncture.
