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Oil Takes Center Stage in Global MarketsGlobal financial markets are entering a highly sensitive phase as oil prices emerge as the dominant force, driven by escalating geopolitical tensions in the Middle East, particularly involving Iran.
According to Christian Mueller-Glissmann, a strategist at Goldman Sachs, crude oil is now acting as a “leading asset,” influencing nearly all asset classes—from equities and bonds to currencies. Speaking on Bloomberg TV, he emphasized that correlations between oil and broader financial markets have become increasingly pronounced as investors await price stabilization following recent volatility.
He described the current phase of the conflict as “high velocity,” with risks escalating rapidly. However, markets are still largely interpreting the shock as inflationary rather than growth-destructive.
In a notable move, Goldman Sachs has raised its oil price forecasts for the second time in less than two weeks, reflecting growing concerns over global supply disruptions.
Daan Struyven, head of oil research at the bank, said the revised outlook is based on a scenario involving prolonged disruptions at the Strait of Hormuz—one of the world’s most critical oil transit chokepoints.
Specifically, the bank assumes that flows through the strait could drop to just 5% of normal levels for six weeks, followed by a gradual recovery over the next month. This scenario is expected to significantly tighten global supply conditions.
Amid ongoing uncertainty, Goldman Sachs expects oil prices to maintain an upward trajectory in the near term. A key factor is the rising “risk premium”—the additional cost markets demand to compensate for supply disruption risks.
The bank now forecasts Brent crude (XBR/USD) to average around $110 per barrel in March–April, up from a previous estimate of $98. This marks a substantial increase compared to 2025 levels, underscoring the growing impact of geopolitical tensions.
Looking further ahead, Goldman Sachs has also revised its longer-term projections:
These forecasts are supported by assumptions of deeper inventory drawdowns and a reassessment of effective spare capacity.
The surge in oil prices is placing central banks in an increasingly difficult position. According to Mueller-Glissmann, while the impact on economic growth has not yet been severe, the balance is likely to shift.
He expects:
This creates a challenging trade-off for policymakers, who must choose between controlling inflation and supporting economic growth.
Notably, central banks are reacting more decisively than they did in 2022, when responses to energy shocks were widely seen as delayed. However, faster reactions do not necessarily make the situation easier to manage.
Another key development is the less clear role of the US dollar in the current environment.
Although the dollar has strengthened recently, Goldman Sachs maintains a view that it could gradually weaken over time. Instead, traditional safe-haven currencies such as the Swiss franc and Japanese yen are seen as more attractive in the current risk environment.
This shift reflects evolving investor behavior, with a broader diversification away from sole reliance on the USD.
Contrary to typical expectations during periods of uncertainty, gold prices have recently come under pressure. Goldman Sachs attributes this to a shift in gold’s role within investment portfolios.
As the US dollar strengthens, the incentive to hold gold as a hedge against currency risk diminishes, weakening demand at the margin.
Positioning is also a key factor. Gold entered the year with elevated exposure, driven by:
As volatility increased, some of these positions were unwound, with certain investors selling gold to raise liquidity during periods of market stress.
Additionally, derivatives such as options have amplified the downturn, contributing to sharper and more mechanically driven price movements.
Despite short-term pressure, Goldman Sachs does not see the recent decline in gold prices as a shift in the long-term investment thesis.
According to Mueller-Glissmann, the pullback may present an opportunity for long-term investors, especially as geopolitical risks remain elevated.
Gold could still benefit if:
Current developments suggest that global financial markets are entering a new sensitive phase, with oil prices at the center of market dynamics.
From energy costs and inflation to monetary policy and capital flows, nearly every aspect of the financial system is being shaped—directly or indirectly—by movements in oil.
In this environment, investors will need to closely monitor:
As even small changes in these factors could quickly shift the direction of global markets.
