Global commodity markets face mounting turbulence as Goldman Sachs projects oil prices could climb to $120 per barrel if shipping attacks across the Middle East escalate further. The banking group also more than doubled its diesel margin forecasts, driving warnings for drivers, manufacturers, and agricultural operators across international markets.
Goldman Sachs Warns of $120 Oil and Soaring Diesel Margins Amid Middle East Conflict
The disruption stems from a combination of geopolitical conflicts choking global supplies. The war in Iran has severely impacted refining capacity and trade routes, while simultaneous Ukrainian strikes have hammered Russian refineries.
Developments over the past few days indicate that the risk of expanding and intensifying shipping disruptions is an important factor that must be taken into account. Dan Struyven, Co-Head of Global Commodities Research at Goldman Sachs, via Bloomberg
Strait of Hormuz Blockade and Plummeting Refined Product Exports
Iran’s blockade of the Strait of Hormuz—a vital channel that previously moved one-fifth of the world’s seaborne oil and gas exports—has restricted the flow of crude required for refineries to produce diesel, jet fuel, and other refined outputs. Data from Kepler shows that average cargo vessel transits through the strait dropped to roughly 10 ships per day during a recent ten-day stretch, marking the lowest level since May.
In addition to trade blockades, regional infrastructure has suffered direct strikes. Iran has targeted multiple Gulf refineries with drones and missiles, including Kuwait’s Mina Abdullah and Mina al-Ahmadi facilities, alongside Saudi Aramco’s Abqaiq processing complex.
These converging supply shocks caused global exports of refined oil products to plunge by a quarter year-on-year, while refinery shutdowns surged by 60 percent compared to normal baselines. Wholesale refined oil product prices doubled during the first two months of the war in Iran. Despite some moderation in June, prices hover around $130 per barrel, representing an increase of nearly $50 since the conflict began.
Doubled Diesel Margins and Pressures on Drivers Across Europe and the US
The collapse in global exports has forced Goldman Sachs to aggressively revise its diesel margin forecasts—representing the price difference between diesel and Brent crude. The Wall Street bank now expects diesel to cost $63 more than a barrel of Brent crude in the US and $49 more in Europe by the end of next year. These figures mark a sharp escalation from previous February forecasts of $27 and $19, respectively.
Britain has grown particularly vulnerable to global price swings due to a steep decline in domestic refining capacity. Operating refineries in the UK dropped from nine to four since 2000, battered by competition from importers with lower or nonexistent carbon pricing. Most recently, Scotland’s Grangemouth refinery halted oil processing in April 2025 after a century of operation, while Lincolnshire’s Lindsey refinery closed last August.
UK drivers have already absorbed a 41.1p increase in diesel pump prices since the end of February, pushing fuel costs to 183.5p per litre. Manufacturers and farmers relying on red diesel to power tractors and other equipment face severe cost pressures alongside motorists.
Timeline for Potential Recovery and Divergent Market Scenarios
Market analysts project prolonged headwinds for the energy sector. ANZ analysts forecast that regional export restrictions will likely persist through the end of 2026. A gradual return of trade flows is anticipated starting in the fourth quarter, though pre-war export levels may not recover until late in the first quarter or early in the second quarter of 2027.
Goldman Sachs advises investors to back natural gas and diesel positions to capture potential gains. However, analysts emphasize that oil could retrace to $80 per barrel if regional exports return to normal levels. Without a swift easing of shipping costs and refinery attacks, prices across global markets remain exposed to further upward spikes.
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