Goldman Sachs chief economist Jan Hatzius set out three reasons why the 10-week closure of the Strait of Hormuz has, to date, inflicted only moderate damage on the global economy, while cautioning that risks remain skewed toward worse outcomes.
Reason one - oil prices did not spike as expected
Hatzius highlighted that crude prices have not climbed as far as many anticipated. He attributed this limited reaction in part to unusually high inventories that existed before the disruption, and in part to market confidence that any very large increases in consumer prices would eventually force a shift in U.S. policy. Those two factors, he wrote, helped prevent the oil-price shock from translating into a larger near-term hit to growth.
Reason two - shortages absorbed via demand shifts
The second channel, according to Hatzius, is that physical scarcities in products such as jet fuel were largely accommodated by what he described as relatively painless forms of demand destruction. Examples he cited include a pronounced move to renewables in China and cuts to flight schedules on lower-value routes around the world. Those adjustments reduced the pressure on supplies without causing proportionate damage to overall economic activity.
Reason three - policy and market cushions
Hatzius's third explanation points to broader supports that have blunted the closure's impact. Fiscal policy responses, the ongoing investment associated with the AI boom, and broadly accommodative financial conditions have combined through the year to cushion growth despite the disruption to shipping through the strait.
Goldman baseline and outlook for oil
Under Goldman's central scenario - a gradual reopening of the Strait that begins soon and completes by late June - the bank expects Brent crude to hold steady over the near term before moving down to about $90 per barrel by year-end.
Recession probability and consumer headwinds
Goldman lowered its 12-month U.S. recession probability by 5 percentage points to 25%. The firm cited a solid 2.5% gain in private domestic final sales in the first quarter and a stronger-than-expected nonfarm payrolls report in April, which showed an increase of 115,000 jobs. Despite the downgrade, Hatzius warned that recession risk remains 5 percentage points higher than it was before the strait closure.
He also detailed consumer-side headwinds that could weigh on spending going forward: the fading boost from tax refunds, higher gasoline prices, slowing wage growth and a personal saving rate that has already declined to 3.6% - the lowest level in three years.
Takeaway
Hatzius's note concludes that while the immediate macro impact of the Strait of Hormuz closure appears contained, the balance of risks points toward outcomes that could be more damaging. The three channels he identifies - restrained oil-price reaction, demand reallocation easing shortages, and policy/market support - explain why growth effects have been moderate so far, but do not eliminate the possibility of a worse trajectory if conditions evolve unfavorably.