GS flags inflation threat as oil risks rise with Iran war

The conflict involving Iran continues to pressure global oil markets, prompting Goldman Sachs to warn in a note Tuesday that the United States faces a renewed inflation threat driven largely by energy prices.

Analyst Jessica Rindels wrote that the bank’s commodities strategists now expect Brent crude to average “$105 in March and $115 in April,” reflecting an assumption that flows through the Strait of Hormuz remain severely constrained for six weeks.

Goldman says Brent could “approach or exceed its 2008 record” in an adverse scenario where disruptions last 10 weeks, before moderating toward $100 by late 2026.

A severely adverse scenario, involving infrastructure damage, would see Brent “$115 in 2026Q4,” with far greater inflation pressure as product shortages emerge.

According to Rindels, “Most of the impact of the war on U.S. inflation will come from higher oil prices.”

The bank estimates that a 10% rise in crude lifts headline PCE inflation by 0.2 percentage points and core inflation by 0.04 points.

Goldman’s passthrough model suggests energy-driven core inflation will peak at “around 0.35pp at the end of the year.”

The conflict is also lifting prices of Gulf exports such as aluminum and nitrogen fertilizer. Goldman expects higher fertilizer costs to push food prices up about 1.5% this year, adding 0.1 percentage point to headline inflation.