Global crude oil output from the Gulf region could rebound significantly within months if the Strait of Hormuz reopens, according to a recent report by Goldman Sachs. However, the bank cautions that a full return to pre-conflict production levels may take considerably longer, particularly if geopolitical tensions in West Asia persist or the key shipping route remains disrupted.
Goldman estimates that Gulf oil production has dropped by about 14.5 million barrels per day—roughly 57% below pre-war levels—highlighting the scale of the disruption. The report suggests that a relatively swift recovery is feasible, provided there are no further attacks on energy infrastructure and the Strait is reopened safely in the near term. Even so, the final phase of the recovery could be slower and more uncertain, especially if logistical and operational constraints intensify.
Among the key challenges are transportation bottlenecks and reduced well flow rates. The bank notes that available empty tanker capacity in the region has declined by around 50%, or 130 million barrels, since the conflict began. Clearing stored oil, restoring pipeline flows, and mobilizing equipment and personnel for field maintenance and well workovers will all be critical to restarting production.
Historical data indicates that flows through the Strait of Hormuz once peaked at 23.3 million barrels per day, compared with a typical level of about 20 million. Pipeline diversion capacity has also temporarily exceeded normal levels by around 3.5 million barrels per day. However, prolonged shutdowns can create technical complications within oil reservoirs, often requiring additional intervention before production can resume at prior levels. The longer the disruption lasts, the more complex and time-consuming these processes become.
Goldman Sachs points to several factors that could support a near-term recovery. Reported damage to oil fields has so far been limited, especially when compared with liquefied natural gas infrastructure. In addition, recent remarks by Saudi Aramco’s chief executive suggest that Saudi Arabia could ramp up output relatively quickly. The bank also notes that both Saudi Arabia and the UAE have historically used spare capacity to stabilize global markets during supply shocks.
Nonetheless, the report warns that a full recovery could take several quarters and may remain incomplete if disruptions persist. Differences in reservoir conditions across countries add another layer of complexity. For instance, fields in Iran and Iraq often operate at lower reservoir pressures, making restarts more technically challenging. Variations in infrastructure quality, maintenance standards, and the impact of sanctions further complicate the outlook.
Past supply disruptions have produced uneven recovery patterns, and Goldman emphasizes that the current shock is without precedent. Forecasts from agencies such as the EIA and IEA suggest that around 70% of lost production could return within three months of reopening, rising to approximately 88% after six months.
Still, Goldman Sachs warns of the risk of lasting damage to production capacity if hostilities resume. Such “scarring” effects have been observed in several major oil supply shocks in the past, underscoring the fragile path to recovery.
(With inputs from ANI)