Goldman Sachs said Tuesday that the conflict surrounding Iran is intensifying pressure on energy markets and poses a renewed inflation threat for the United States, driven primarily by rising oil prices.
In a note relaying the bank's commodities team outlook, analyst Jessica Rindels reported that Goldman now expects Brent crude to average "$105 in March and $115 in April," on the assumption that flows through the Strait of Hormuz remain severely constrained for six weeks.
The bank set out an adverse scenario in which disruptions persist for 10 weeks, under which Brent could "approach or exceed its 2008 record," before easing toward roughly $100 by late 2026. In a more severely adverse scenario that includes infrastructure damage, Goldman sees Brent at "$115 in 2026Q4," a path that would create far greater inflationary pressure as product shortages materialize.
Goldman emphasized the dominant role of oil in transmitting the conflict's effects to U.S. inflation. As Rindels put it, "Most of the impact of the war on U.S. inflation will come from higher oil prices." The bank's model implies that a 10% increase in crude would lift headline PCE inflation by 0.2 percentage points and core inflation by 0.04 percentage points.
Goldman's passthrough estimates further suggest that energy-driven core inflation will peak at "around 0.35pp at the end of the year." The conflict is also lifting prices for other Gulf exports, with Goldman noting upward pressure on aluminum and nitrogen fertilizer.
The bank expects that rising fertilizer costs will raise food prices by about 1.5% this year, which would add roughly 0.1 percentage point to headline inflation.
Reflecting these dynamics, Goldman raised its December 2026 headline PCE forecast to 3.1% and now assigns a 30% probability to a recession. The firm still anticipates two Federal Reserve rate cuts this year but cautioned that risks are skewed toward tighter policy should oil shocks deepen.
The bank's analysis links the intensifying geopolitical disruption in the Gulf directly to both short-term commodity price spikes and broader inflation outcomes, with attendant implications for monetary policy and economic risk assessments.