Goldman Sachs: Higher Natural Gas Prices, Slightly Larger Economic Headwinds
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The closure of the Strait of Hormuz due to the Iran conflict has sharply driven up oil and natural gas prices. Goldman Sachs commodities strategists assume the strait will remain closed through mid-April, forecasting Brent crude at $90 per barrel in Q2, declining to $80 in Q4. European TTF gas is projected to average $16.90 per mmBtu in Q2, dropping to $13.65 by Q4, while global LNG (JKM) averages $18.15 in Q2, falling to $14.65 by Q4.
Natural gas prices have surged far more than oil, reflecting supply rigidities and potential permanent damage to Qatari infrastructure. Qatali LNG represents 19% of global supply. Goldman estimates that every 10% increase in natural gas prices independently boosts global headline inflation by 8 basis points and reduces global GDP by 0.04%. European economies bear the largest impact.
When combined with the oil price shock, the Iran conflict is estimated to increase global inflation by 0.8%, compared to 0.7% for oil alone. The updated 2026 global GDP drag is 0.5%, exceeding the 0.4% drag from oil exclusively. Natural gas prices affect inflation through three primary channels: direct household energy costs, elevated electricity prices via a roughly 25% passthrough rate from gas-fired generation, and rising producer costs that feed into core inflation.
In an adverse scenario where the strait remains closed through mid-May, global inflation could rise by 1.7 percentage points. A severe adverse scenario involving prolonged closure and severe infrastructure damage could push inflation up by 2.3 percentage points. Risks remain skewed toward worse outcomes and higher energy prices.