Goldman Sachs warns Iran war pushes up oil prices, poses inflation threat

Investing.com - The ongoing conflict involving Iran continues to pressure the global oil market, prompting Goldman Sachs to warn in a Tuesday report that the U.S. faces a new round of inflation primarily driven by energy prices.

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Analyst Jessica Rindels wrote that the bank’s commodities strategist currently expects Brent crude to average $105 in March and $115 in April, based on the assumption that oil flows through the Strait of Hormuz remain severely restricted for six weeks.

Goldman Sachs stated that in a prolonged disruption lasting 10 weeks, Brent crude prices could “approach or exceed the record highs of 2008,” before falling back to around $100 by the end of 2026.

In a severe adverse scenario involving infrastructure damage, Brent crude could reach $115 in Q4 2026, with inflationary pressures rising sharply as product shortages emerge.

Rindels said, “The war’s impact on U.S. inflation mainly comes from rising oil prices.”

The bank estimates that every $10 increase in oil prices will raise overall PCE inflation by 0.2 percentage points and core inflation by 0.04 percentage points.

Goldman’s transmission model shows that energy-driven core inflation could peak at about 0.35 percentage points by the end of the year.

The conflict has also pushed up prices for Gulf-region export products such as aluminum and nitrogen fertilizers. Goldman Sachs expects rising fertilizer costs to increase food prices by about 1.5% this year, adding 0.1 percentage points to overall inflation.

The bank has raised its December 2026 overall PCE forecast to 3.1%, with a current recession probability of 30%. Goldman Sachs still expects the Federal Reserve to cut interest rates twice this year but notes that the risk of policy tightening will increase if oil price shocks deepen.

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