Goldman Sachs: Gulf oil producers are turning to alternative routes, and oil shipments through the Strait of Hormuz may only recover to about 70% of pre-war levels.

With the signing of a memorandum of understanding between the United States and Iran and the reopening of the Strait of Hormuz, the energy transportation through this global chokepoint is expected to gradually resume. However, Goldman Sachs believes that the volume of crude oil transported through the Strait of Hormuz in the future may only recover to about 70% of pre-war levels, and points out that oil-producing countries in the Middle East are increasingly relying on alternative transportation routes. Goldman Sachs analysts Yulia Zhestkova Grigsby wrote in a report, "If oil exports in the Gulf region return to pre-war levels, this process may only require an additional 13 million barrels per day of crude oil flow through the Strait of Hormuz." According to data from the International Energy Agency (IEA), before the outbreak of the war, the Strait of Hormuz bore about 20 million barrels of crude oil and petroleum products transport per day. Analysts expect the recovery of crude oil transport volume to be completed by the end of next month, and the Gulf region's oil production is expected to recover by October. During the war, due to the blockade measures implemented by Iran and the United States, the transportation of crude oil through the Strait of Hormuz almost came to a standstill, with the vast majority of commercial shipping activities severed. In this situation, oil-producing countries in the Gulf region, including Saudi Arabia, the United Arab Emirates, and Iraq, increased their use of alternative infrastructure to bypass the Strait of Hormuz in order to maintain the supply of energy to global customers. Among them, Saudi Aramco increased the utilization of the east-west oil pipeline crossing Saudi Arabia to transport crude oil to the Red Sea coast; the UAE used oil pipelines to transport crude oil to the port of Fujairah outside the Strait of Hormuz; and Iraq shifted some of its crude oil exports to the port of Ceyhan in Turkey. This month, the UAE stated that it is advancing an ambitious plan to eventually eliminate its dependence on the Strait of Hormuz. The plan includes expanding ports such as Diba, Fujairah, and Khawr Fakkan along the coast of the Gulf of Oman, outside the Strait of Hormuz, and building at least one new port along the same coastline. UAE Minister of Foreign Trade Thani Al Zeyoudi said, "We are moving towards achieving zero dependence on the Strait of Hormuz, and this goal will not change regardless of whether the strait is open." "We hope that the strait will reopen as soon as possible, and I believe it will reopen, but this will not stop us from advancing new development plans." Kuwait also stated that it is seeking to replace oil exports by sea with a pipeline system. Sheikh Nawaf Al-Sabah, CEO of Kuwait National Petroleum Company, said at a meeting that the company is negotiating with Saudi Arabia and the UAE to expand the existing oil pipeline networks in both countries in order to transport more Kuwaiti crude oil in the future. In addition, oil-producing countries in the Gulf region have also formed an expanding network of government-owned oil tankers, known as a "stealth fleet," which transports crude oil through the Strait of Hormuz by first sailing out of the strait with their location transponders turned off, then loading the oil onto other tankers through ship-to-ship transfer, and finally transporting it to Asia and other regions, alleviating the global energy impact caused by the Middle East wars. This covert method is known as "dark ship transits." Goldman Sachs analysts state that the current observed crude oil flow through the Strait of Hormuz is about 1.3 million barrels per day, in addition to about 1.6 million barrels per day of flow in the Gulf of Oman, which may be related to "dark ship transits." At the same time, the total amount of crude oil transported through the ports of Yanbu in Saudi Arabia, Fujairah in the UAE, and Ceyhan in Turkey reaches 7.5 million barrels per day. The analysts believe that the capacity of oil tankers will not be a limiting factor in the recovery of transportation. Currently, there are approximately 860 million barrels of capacity in empty oil tankers available for deployment near the Strait of Hormuz or within a five-day sailing range from the strait. However, they also point out that some shipowners may still be reluctant to let their ships pass through the Strait of Hormuz. Due to ongoing uncertainties regarding shipping safety, most shipowners and operators are currently adopting a wait-and-see attitude, stating that they need more details to assess whether it is safe to pass through the strait. In addition, reports citing market services agency Kpler's analysis indicate that out of hundreds of idle ships in the Gulf, nearly 300 ships are loaded and ready to pass through the Strait of Hormuz, with about the same number of ships in the Gulf of Oman waiting to return to their main export terminals. In theory, this could release millions of barrels of oil supply, but actual passage still faces multiple obstacles, including the need to clear ship hull fouling and the right to navigate narrow channels. It is currently unclear how much of a threat sea mines pose to vessels passing through the Strait of Hormuz. The global shipping trade organization Bimco warned on Monday that "the threat of sea mines in the region remains a cause for concern." The organization reminded ship operators that the current security situation in the area remains high-risk. Jakob Larsen, Bimco's head of safety and security, said, "Due to a lack of sufficient details and past instances of overly optimistic security assurances, we believe that the shipping industry still faces volatile security conditions." "At this stage, we still believe that the risk of ships resuming travel through the strait is very high." Wall Street and Fitch Ratings cut oil price forecasts As market sentiment warms up towards the optimistic outlook for the recovery of Middle Eastern oil supply, international oil prices have fallen sharply. Major Wall Street banks such as Morgan Stanley and Goldman Sachs, as well as the international rating agency Fitch, have all lowered their oil price forecasts for the fourth quarter of this year, citing the expectation that the speed of the recovery of Persian Gulf crude oil exports may be faster than previously expected. Morgan Stanley forecasts that the average spot price of Brent crude oil in the third quarter will be $90 per barrel, below the previous forecast of $100 per barrel; the average price in the fourth quarter is expected to be $80 per barrel. Analysts at the bank, including Martijn Rats, wrote in a report, "While there are still many issues that need further negotiation, key risks persist, but at present, this agreement is a crucial step in promoting a relaxation of the situation and boosting crude oil exports through the Strait of Hormuz." Morgan Stanley believes that the normalization of oil tanker transport may still take "several weeks" because there is still a need to complete mine clearance work, rebuild commercial confidence in ship owners and insurance companies, and wait for ships that evacuated the region earlier to return. Analysts at Morgan Stanley said, "To restore crude oil production, it is necessary to empty the export oil tanks. Therefore, the number of empty oil tankers entering the Gulf might be more important than the full ones leaving the Gulf." They added, "We expect that 50% of production capacity will be restored by September, 80% by December, and the remaining portion will gradually recover by early 2027." In contrast, Goldman Sachs is more optimistic. The bank expects that the supply of crude oil in the Persian Gulf region will fully recover by the end of next month. The bank stated in a report that the Brent crude oil price for the fourth quarter is currently expected to be $80 per barrel, below the previous forecast of $90 per barrel. Analysts at Goldman Sachs, including Daan Struyven, wrote in the report, "Although the details of the agreement are not yet clear, we currently assume that crude oil exports from the Persian Gulf region will return to pre-war levels by the end of July." Fitch also released a report on Monday, stating that while the specific terms of the agreement have not been disclosed, the reopening of the Strait of Hormuz, the crucial chokepoint for global energy transport, is expected to be slightly ahead of the organization's previous expectations. Fitch made a key judgment in the report: "If the Strait of Hormuz fully opens, as the region's crude oil production gradually returns to normal levels and maritime shipping returns to normal, the global oil market is expected to fall into an oversupply situation again in about a month." Fitch's judgment is based on the rapid recovery on the supply side - Iran and surrounding oil-producing countries are expected to accelerate production recovery, and regional crude oil export capacity is expected to approach pre-conflict levels within a few weeks. Non-OPEC countries continue to increase production - the production of non-OPEC oil-producing countries such as the US, Brazil, and Guyana is still rising, and strong growth is expected in global non-OPEC supply in 2026. OPEC's production capacity has elasticity - OPEC's idle production capacity is ample, and if member countries further release production to compete for market share, it will exacerbate supply pressure. Fitch maintains its baseline forecast for the 2026 average annual price of Brent crude oil at $87 per barrel, but points out that with the early reopening of the Strait of Hormuz, this forecast faces significant downward risks. Specifically, the organization expects the average price of Brent crude oil in the fourth quarter to fall to $70 per barrel. For 2027, if supply continues to outstrip demand growth and oil prices will likely further decline to $65 per barrel or even lower. Reopening the Strait of Hormuz, but recovery may be challenging Trade data company Kpler stated on Monday that if the agreement reached between the United States and Iran can be implemented smoothly without major setbacks, the volume of vessels passing through the Strait of Hormuz is expected to return to about 50% of pre-war levels within a month. Analysts at the company stated in a research report that the number of vessels passing through the Strait of Hormuz is expected to increase to 40 per day, while before the US and Israel attacked Iran on February 28, the average number of vessels passing through the strait was about 100 per day. The analysts stated that the first vessels to pass through the Strait of Hormuz would be those trapped in the Persian Gulf and have already completed loading. They estimate that there are currently about 118 oil tankers in the Persian Gulf that can leave the region within 15 days. The analysts pointed out that the departure of a large number of trapped vessels is a one-time event and should not be interpreted as a continuous increase in shipping volume. The real key question is how many vessels will re-enter the Persian Gulf after the backlog capacity is absorbed. Kpler analysts stated that there are currently a large number of vessels waiting in the Gulf of Oman and the Arabian Sea for the Strait of Hormuz to reopen. Wright stated that within the first 30 days after the US-Iran agreement takes effect, the number of oil tankers entering the Persian Gulf could increase to 12 per day, about 50% of pre-war levels. However, Haris Khurshid, Chief Investment Officer at Karobaar Capital LP in Chicago, said, "The market often sees the reopening of the Strait of Hormuz as flicking a switch, but in reality, it's more like a long-term process." "Physical flows can restart quickly. Trust sentiment often does not." He added that reopening the strait and normalizing trade flows are two different things, noting that many buyers and insurers remain cautious, still fearing a repeat of the "crying wolf" scenario from former President Trump, and some buyers have spent months locking in alternative routes, suppliers, and inventories, and may not immediately return to the route after the reopening of the Strait of Hormuz. Priyanka Sachdeva, Senior Analyst at Phillip Nova Pte Ltd., said in a report, "While this geopolitical conflict may have ended and crude oil transportation through the Strait of Hormuz may gradually return to normal, the damage that has been done cannot be reversed overnight. This includes any actual damage that may have occurred to petroleum infrastructure in countries like the UAE, as well as the economic pressure that oil-importing economies have faced from high energy costs for months." Charu Chanana, Chief Investment Strategist at Saxo Markets, pointed out, "Even though the market may react clearly to the headlines of the reopening of the Strait of Hormuz, the reality at the operational level for core participants such as insurers may be more chaotic.""Mine clearance, insurance costs, port congestion, and the risk of geopolitical factors being disrupted again by Israel could all slow down the movement of oil more than the news headlines suggest." In addition, the subsequent negotiations between the US and Iran, and the successful implementation of the agreement are still among the risks. Some analysts have pointed out that the memorandum of understanding reached between the US and Iran will be the first step in achieving regional stability, but the next stage of negotiations between both parties is still complex and difficult, and the possibility of reaching a final agreement remains to be seen. The possible recurrence of a "cycle of war and peace" cannot be ruled out. Even if neither the US nor Iran wants to reignite full-scale conflict, Israel may refuse to fully "stand down" in Lebanon, and may lobby the US to impose harsh conditions on Iran in areas such as the nuclear issue, making it more difficult for the US and Iran to reach a final agreement.