Goldman Sachs: A Q&A on Economic Forecasts Amid the Evolving War with Iran
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Following a two-week ceasefire announcement between the US and Iran, Goldman Sachs maintains its baseline forecast from oil strategists, which assumes a six-week disruption at the Strait of Hormuz followed by a gradual recovery. However, oil flows remain sluggish, negotiations have stalled, and the US has announced a blockade of the strait, leaving risks skewed to the upside. In adverse scenarios, Brent crude could reach $100 per barrel by Q4 2026, or $115 in a severe case, compared to the base case of $80.
Since the conflict began, Goldman Sachs has revised its macroeconomic forecasts to reflect the economic drag. The December 2026 year-over-year headline PCE inflation forecast was raised by 1 percentage point to 3.1%, with April inflation potentially peaking at 3.6%. Core PCE was increased by 0.3 percentage points to 2.5%. Conversely, the 2025 Q4/Q4 GDP growth forecast was lowered by 0.5 percentage points to 2.0%, reflecting the hit to real income and consumption from higher energy costs. The unemployment rate is now expected to climb to 4.6%.
Given rising unemployment and limited inflation progress, the Federal Reserve is expected to remain on hold, with rate cuts anticipated in September and December.