Wall Street's most-followed commodities trading platform has given a number to the worst case scenario, and it's an unpleasant one for oil importing nations. If shipping is kept interrupted in the Strait of Hormuz, then the price of Brent crude can exceed $120 a barrel in the fourth quarter of this year, Goldman Sachs told its clients on Monday, bringing the price close to the $126.41 high set during the previous violent flare-up of the U.S.-Iran conflict on April 30. But the bank's commodities team, headed by Daan Struyven, did not make it into a prediction, but rather called it a tail risk: the bank's main prediction was that Brent will average $80 a barrel in the final quarter of 2026 and eventually fall back to $75 next year if Washington and Tehran manage to calm down from confrontation.

The calculus has been altered, not only by rhetoric, but by flow data. Goldman said Persian Gulf crude shipments are down to less than 45 percent of pre-war levels as shipping firms reroute their vessels or just wait out the tension rather than risk using a waterway that typically transports roughly a fifth of the world's seaborne crude oil and liquefied natural gas. The bank's pessimistic outlook on the risks to its own $80 forecast is compounded by that squeeze, which has already added to the jittery feeling in the market. Or an escalation of the conflict, a kind of compounding disruption for which the market might have to live on for months if a long blockade were to take place, or a broadening of the conflict into the Red Sea where the Houthis have separately threatened shipping lanes to Saudi Arabia.

Part of this story has already been told in prices. The fighting escalated on July 19, when Brent was above $90 a barrel before ceasefire talk and rumours of backchannel talks brought the price down back to around $88.47-$88.83 by Tuesday. WTI is consolidating in a narrower range around $82, indicating that traders are still hedging, not fully de-escalating or a real supply shock. That uncertainty is also a nugget of information that is valuable: it shows that a deal or a ceasefire would be possible, but not definite, and few desks want to be caught off-guard if it fails.

This is not a mere commodities story for India, where crude import dependency has risen to over 88 per cent in recent times. Crude import costs more than doubled in the April-June quarter from the previous six months, even as volumes did not rise significantly, according to provisional figures released by the Petroleum Planning and Analysis Cell (PPAC), which indicated that landed costs rose in the wake of the earlier tension in the Hormuz. No matter how much growth targets are set or budget assumptions made, each rupee rise in the price of a barrel has historically translated to tens of billions of rupees added to the annual import bill, meaning these are a mechanical relationship. A continued run towards $120 would increase the trade deficit, put pressure on the rupee as it has been trying to settle and muddle the inflation calculations that RBI is dealing with in its policy deliberations.

The underlying estimate of the credit rating agency CRISIL for the coming fiscal year is $90-95 per barrel for Brent, materially higher than Goldman's, signaling a rather different outlook by the agencies on the chances of a clean resolution. That is important because it has implications on what refiners, the oil marketing companies and the finance ministry expect the remainder of the year to look like. The airlines, tyre manufacturers, paint companies, chemical companies and logistics companies, who are dependent on the energy companies, would be hit the hardest by the increase in input prices, while the energy players and state-run explorers would benefit from higher realisations on the exchanges. This divide is now becoming apparent in the repricing of energy stocks in Indian exchanges.

Not all of those on the Street are as cautious as Goldman. Kotak Institutional Equities has stated that OPEC+ still have 6 to 7 million barrels a day of spare capacity, and that there's a good level of stocks in the world to dampen any short-term rise once the initial panic subsides. That's at least a possibility, given how fast the price of Brent has pulled back from its record July 19 peak. But it relies on the Strait remaining at least partially navigable and on Iran not to act on the more extreme measures which have been discussed by its parliament in the past.

The truthful interpretation of the current situation is that even Goldman isn't sure enough to call it a clean one. The bank's base case is de-escalation occurs, while its upside case is that de-escalation does not occur. The economy of the world and India, in particular, has been on a learning curve over the past few months, as it has learned how fast a shipping lane a few dozen miles wide can alter budget expectations, currency predictions and household fuel bills all in one.