Oil at $120 Is Goldman Sachs’s Worst-Case Scenario – Markets Are Already Halfway There.

The atmosphere changed somewhere between a half-empty diesel station outside Hamburg and the screens of a London trading floor. Like these things often do, it happened quietly. In January, Brent crude was trading at about sixty dollars. It was close to 120 by the second week of March. Ten weeks. It only required that.

Goldman Sachs does not use the term “worst oil crisis in history” carelessly. The International Energy Agency had agreed to “largest energy supply disruption in history” two weeks prior, which at the time sounded terrible enough. The upgrade is important. The use of superlatives by analysts who dedicate their lives to tail risk modeling indicates a change in the fundamental workings of the world economy.

The Strait of Hormuz, a narrow choke point that typically allows about a fifth of the world’s oil and LNG to drift on their way to refineries in Rotterdam, Singapore, and Houston, is, of course, the trigger. Almost nothing has changed in over a week. Iraq has reduced production by 70% in its three primary fields. Because their storage is full and there is nowhere for the crude to go, Kuwait, the United Arab Emirates, and Qatar have reduced production. Saudi Arabia is stealthily rerouting cargo through Yanbu on the Red Sea while intercepting drones over Shaybah. Constructed over many years, the entire apparatus is improvisational.

The timeline that Goldman lays out has an almost cinematic quality. Somewhere between Fujairah and the European refineries that are waiting for them, the final tankers from the Gulf are already at sea. The last shipment of jet fuel to Europe is expected to arrive on April 9. It becomes more difficult to model after that. Ticking time bomb is a term that JPMorgan analysts have been using frequently in client notes. They contend that physical scarcity will move westward through April, arriving in the US last.

It’s difficult to ignore how the human costs appear in the tiny figures. Diesel is costing German trucking companies an additional twelve hundred euros per vehicle each month. According to reports, up to 100,000 truck driver jobs in Germany—roughly 15% of the industry—are in jeopardy. A potential food crisis linked to fertilizer shortages has been highlighted by The Guardian. This is the kind of secondary effect that economists often underestimate until it shows up at the grocery store. It might take five years to fix Qatar’s Ras Laffan LNG facility, which was severely damaged during the fighting. Five years. There isn’t a price increase. That is a structural alteration.

Some of this is priced by markets, but not all of it. The VIX has surged to 34.7, the highest level since the April 2025 Liberation Day surge. South Korea’s Kospi fell six percent and tripped a circuit breaker, while Japan’s Nikkei fell five percent overnight. The two-year gilt yield experienced a swing of twenty-seven basis points in a single day, which was last observed during the Liz Truss incident. Strangely, though, US stocks continue to tease record highs. Investors seem to be waiting for confirmation and still holding out hope that this will end the way these crises typically do.

According to the Royal Bank of Canada, if oil prices remain at $100, US inflation could rise to 3.7%. If it rises to one twenty-five percent, RSM estimates the GDP hit at 0.8 percent. Less optimistic than most, Westpac has projected a price of $185 per barrel if Hormuz is closed for three months. A protracted war of attrition has a 50% chance, according to Edmond de Rothschild.

One hundred and twenty is Goldman’s worst-case scenario. As of this week, markets are halfway there. A deadline in Tehran and a decision in Washington that no one outside of a few rooms can truly predict may determine whether they stay halfway or complete the climb.