Goldman Sachs Sets 70 Percent Ceiling on Hormuz Oil Flows as Saudi Arabia Routes 7.5 Million Barrels Daily to Red Sea

Brent crude futures traded at $77.98 per barrel in early Wednesday trading on ICE, per OilPrice.com with an 11-minute delay. WTI crude traded at $74.54 per barrel on CME, down $2.25. Tuesday's ICE Brent settlement was $78.69 per barrel, per data cited in Oil Authority's IEA June 2026 surplus report. Markets absorbed the first full trading session since the US-Iran ceasefire took effect June 18, with the 60-day agreement including US sanctions removal on Iran, Iranian asset unfreezing, and an Iranian commitment to forgo nuclear weapons development.

Goldman Sachs Projects a 70 Percent Recovery Ceiling

Goldman Sachs projects Strait of Hormuz crude flows will recover to no more than 70 percent of pre-war levels, equivalent to 13 million barrels per day, per the bank's analysis as reported by Bloomberg. That ceiling implies roughly 5.5 million barrels per day of pre-war Hormuz traffic will not return through the strait, diverted instead through alternative Middle Eastern export corridors. Goldman estimates the 70 percent threshold arrives by end of July, with full regional production not restored before October. Current visible flows through Hormuz stand at just 1.3 million barrels per day, plus another 1.6 million barrels per day from vessels running with disabled AIS transponders, per Goldman data cited by Bloomberg.

Saudi Arabia's East-West Pipeline Has Become the Primary Export Route

Saudi Arabia now routes 7.5 million barrels per day through its East-West crude oil pipeline to the Red Sea port of Yanbu, per Goldman Sachs analysis reported by Bloomberg. That single pipeline now moves more volume than Goldman projects all of Hormuz will handle at the 70 percent recovery ceiling. Saudi Aramco's Petroline system has operated as the kingdom's primary crude export corridor since the Hormuz disruption began in early March. The infrastructure concentration on the Red Sea route changes freight economics for Middle Eastern crude reaching Asian refineries, adding Red Sea routing costs not priced into pre-war differentials.

UAE and Iraq Are Adding Permanent Bypass Capacity

The UAE, which left OPEC during the conflict, is constructing a new Hormuz-bypass pipeline with completion targeted within one year, per Goldman Sachs. Iraq is weighing a significant increase to its oil flows via the Turkey pipeline to reduce dependence on the Basra export route. Both projects, if completed on schedule, would push the permanent Hormuz traffic diversion above Goldman's current 5.5 million barrel per day estimate. Wood Mackenzie projects the broader region recovers to 70 percent of prior production within three months and 90 percent within six months, with Iraq's recovery trailing given its larger shut-in volumes and more complex field conditions.

62 Million Barrels Sit in Gulf Supertankers

About 62 million barrels of crude oil sat loaded on approximately 30 supertankers inside the Persian Gulf as of June 18, awaiting Hormuz passage, per Signal Group data cited by Bloomberg. A separate queue of 90 million barrels of non-Iranian crude also sat in the region. Asian refiners were already supplied from West African and American sources ahead of the ceasefire, which may limit prompt demand for Gulf barrels once the strait clears. Jotaro Tamura, chief executive of Mitsui OSK Lines, said "material agreements and safety guarantees" are needed before widespread route normalization can proceed.

Wall Street Splits on 2026 and 2027 Price Paths

Goldman Sachs cut its Q4 2026 Brent crude forecast to $80 per barrel, down from $90, and projects a 2027 annual average of $75 per barrel, per Bloomberg reporting. Morgan Stanley reduced its Q4 2026 Brent forecast to $80 per barrel as well, down from $100 in its Q3 estimate, per the same Bloomberg data. The IEA projects a 2027 oil surplus exceeding 5 million barrels per day if Middle Eastern supply recovers as the deal holds. Argus chief economist David Fyfe pushed back on the bearish direction: "Don't expect this to be a one-way traffic in terms of crude prices going further down." Fyfe pointed to a global oil inventory deficit drawing at roughly 2.5 million barrels per day through Q3.

Structural Routing Change Reinforces the Earlier Supply Floor Analysis

Oil Authority's June 17 report on Hormuz mine clearance and tanker insurance identified the operational barriers slowing supply recovery, citing projections from Rystad, Wood Mackenzie, EIA, Capital Economics, and Kpler. Goldman's routing analysis adds a structural dimension to those operational delays. Even as mines clear and insurance markets reopen, Goldman estimates 5.5 million barrels per day of pre-war Hormuz traffic has been permanently redirected to Saudi Arabia's Red Sea corridor. That volume is unlikely to revert to Hormuz transit once the alternative infrastructure becomes the established commercial norm.

When Goldman first cut its Brent forecast to $80 on the ceasefire announcement, Brent was at $80 per barrel. At $77.98 on Wednesday morning per OilPrice.com, Brent now sits below that initial reaction level. Americas crude exports to Asia surged 40 percent during the Hormuz disruption per Oil Authority's Americas crude market-share coverage, and Goldman's structural routing argument suggests some of that market share shift is durable. The 60-day ceasefire negotiation window means the outcome is not locked in, and Argus notes a deal breakdown would send prices sharply higher given depleted global inventories.