Goldman Sachs' "contrarian bullish" logic: The Strait of Hormuz will resume traffic in 5 days, 70% in two weeks, and 100% in four weeks.

Amidst the turmoil in the global market, Goldman Sachs goes against the trend and remains bullish, believing that the recent market pullback is a buying opportunity rather than the beginning of a long-term bear market. This is based on the optimistic expectations of the institution for the "four-week recovery" of circulation in the Strait of Hormuz. Wall Street News previously mentioned that Goldman Sachs' strategy team, led by Peter Oppenheimer, wrote in a report on Wednesday that despite the "significant resistance" facing risk assets from the Middle East war and disruptive impacts of AI, the resilience of economic fundamentals and strong corporate earnings growth mean that the depth and duration of this pullback will be limited. Goldman Sachs' optimism for the global market is largely based on expectations for a rapid repair of the energy supply chain. Goldman Sachs' chief oil strategist Daan Struyven expects that oil transportation blocked in the Strait of Hormuz will remain at the current extremely low level in the next 5 days, gradually recover to 70% of normal volume within two weeks, and achieve 100% full normalization after four weeks. Path of Flow Recovery in the Strait and Storage Pressure Goldman Sachs has set a specific timetable for the recovery of flow in the Strait of Hormuz. The bank assumes that oil exports through the strait will remain at the current level (about 15% of normal) for an additional 5 days, then gradually recover to 70% in the following two weeks, and reach 100% in the subsequent two weeks. Against the backdrop of blocked exports, oil-producing countries in the Middle East face severe storage pressure. Goldman Sachs estimates that the available onshore crude oil storage capacity in Saudi Arabia, the United Arab Emirates, Iraq, Kuwait, Qatar, and Iran totals about 600 million barrels, while idle production capacity before the interruption slightly exceeds 300 million barrels. In a complete shutdown scenario, this idle production capacity can only accommodate trapped crude oil for about 23 days. The report emphasizes that even if exports through the strait decrease by only 85%, significant production cuts will occur before the 23-day deadline approaches. As crude oil inventory levels approach storage limits, production will be gradually forced to decrease. Countries with smaller storage buffers, such as Iraq, will face system congestion and production cuts earlier. Expectations for Supply and Demand Boost Oil Prices in the Second Quarter Many investment banks, which previously held a pessimistic view on oil prices due to "structural oversupply," have begun to raise their target prices intensively. Daan Struyven also stated in the latest report that the market is digesting mixed signals - the gradual recovery of strait flow could bring some relief, but increasing evidence of production cuts has reignited concerns. Based on these judgments, Goldman Sachs has raised its average price forecasts for Brent crude oil in the second quarter by $10 to $76 per barrel, and raised its forecast for WTI crude oil by $9 to $71 per barrel. The report points out that the upward revision of forecasts is mainly based on two reasons: first, the blocked exports through the strait will lead to a significant decrease in commercial inventories in the Organization for Economic Cooperation and Development (OECD) and an estimated 200 million barrel reduction in Middle Eastern oil production in March; second, the lingering geopolitical uncertainty will continue to support risk premiums. Long-term Price Recovery and Two-Way Risks Although oil prices are strongly supported in the short term, Goldman Sachs has relatively limited adjustments for future oil prices. The bank has raised its forecast for the fourth quarter of 2026 for Brent crude oil from $60 to $66, and raised its forecast for 2027 from $65 to $70. Goldman Sachs expects that as the effects of the interruption fade, the market will return to a state of oversupply, and the spot price of Brent will drop from the current $82 to $66 in the fourth quarter of 2026. This decline reflects the gradual disappearance of a $13 risk premium and a $3 decrease in fair value. Goldman Sachs points out that the risks to current price forecasts still significantly lean towards the upside. For example, if the flow through the Strait of Hormuz remains low for an additional five weeks, Brent oil prices could reach $100 to prevent inventories from falling to critical levels by disrupting demand on a large scale. However, downward risks cannot be ignored. Market analysis indicates that if President Trump's convoy plan or multi-party diplomatic efforts are effective in speeding up the recovery of flow through the strait, the current risk premium could quickly disappear. Once ships resume passage, Brent oil prices could face a significant drop of $12 to $15. This article was reprinted from Wall Street News; GMTEight Editor: Chen Xiaoyi.