Goldman Sachs revealed in a note Monday morning that it has raised its long-dated oil price assumption by $9 per barrel to $76 at the peak of the U.S.-Iran war, citing a higher structural security premium, but said the eventual expansion of pipeline capacity bypassing the Strait of Hormuz poses a downside risk to that assumption over time.

Analyst Alexandra Paulus told investors that the recent oil price rally, driven by tanker attacks and renewed U.S.-Iran strikes, “demonstrates how critical Hormuz flows remain for prices in the short-term.”

However, she said long-term pipeline expansion across the Middle East is set to meaningfully reduce that vulnerability.

Goldman estimated that enough pipeline capacity will likely be added to insulate over 45% of pre-war Persian Gulf export levels from potential Hormuz disruptions by end-2027, rising to more than 60% by end-2028.

In its base case, the bank forecast effective pipeline capacity rising by an additional 3.8 million barrels per day by end-2027 and 7.3 million barrels per day cumulatively by end-2028, based on seven pipelines already under construction, in the planning phase or under consideration.

Paulus noted that history suggests single-country pipelines in the Middle East “are likely to be built relatively quickly,” with a median construction time of 2.5 years across Goldman’s sample.

In an accelerated scenario, pipeline capacity could insulate 75% of exports by end-2028, while a conservative scenario implies just over 45%. Goldman added that recent attacks highlight that a serious re-escalation “could re-intensify the short-run upside risk to oil prices.”

Source: Investing.com