In the wake of a major U.S. and Israeli military campaign against Iran that resulted in the death of Supreme Leader Ayatollah Ali Khamenei, global oil markets experienced an immediate jolt. Brent crude oil prices surged 8% over the weekend to approximately $78 a barrel, reflecting acute anxiety over Middle Eastern energy supplies. However, according to Goldman Sachs’ head of oil research, Daan Struyven, this specific price point reveals exactly what traders are betting on: a disruption lasting about four weeks.
Speaking on the Goldman Sachs Exchanges podcast on March 2, Struyven broke down the math behind the market’s reaction. Without sustained supply disruptions, Goldman Sachs estimates the fair value for Brent crude oil to be around $65 per barrel. “With the market price at $78, the market is essentially pricing an $13 per barrel risk premium,” Struyven explained. According to the firm’s models, this $13 premium perfectly aligns with the expected price impact of a 100% full closure of the Strait of Hormuz lasting for roughly one month.
Currently, the Strait of Hormuz—a vital chokepoint that normally handles about one-fifth of the world’s global oil supply—is not completely shut down. Instead, Struyven explained that the sharp drop in export flows is being driven by fear. Shippers and oil producers have entered a “wait-and-see mode” following reports of damage to three ships and skyrocketing insurance premiums.
