The war in Iran has injected the kind of geopolitical uncertainty that economists are trained to resist quantifying. Goldman Sachs's global economics team — led by Joseph Briggs, alongside Megan Peters and Sarah Dong — has done it anyway. Published March 5, 2026, their Global Economics Comment1 is a disciplined, scenario-based assessment of what the conflict means for growth, inflation, and monetary policy across the world's major economies. The verdict, at the baseline: manageable. The warning underneath: it depends entirely on whether the Strait of Hormuz stays open.
The Oil Price Mechanism
The report's central organizing logic is straightforward. The primary transmission channel from conflict to economy is energy prices. Oil has risen to around $80 per barrel (at the time of the sourced report — a 14% increase since late February — and the Goldman team's commodities colleagues estimate that the current price already incorporates market expectations of roughly five to six additional weeks of full Strait of Hormuz closure, with some pipeline redirection factored in.
Under the team's baseline scenario, that price rise moderates. Goldman's commodities forecast has oil settling around $76 per barrel on average through the second quarter of 2026, before easing further to $65 per barrel in the fourth quarter. The logic: a fading risk premium as the conflict stabilizes, against the backdrop of a structurally oversupplied global oil market.
That baseline path, applied through Goldman's standard country-level elasticity models, produces relatively contained damage. A 0.1 percentage point drag on global GDP growth. A 0.2 percentage point boost to headline inflation. Core inflation — the measure most central banks weight heavily — barely registers, with impacts of less than 0.1 percentage points globally. The US team estimates that a 10% oil price increase pushes core PCE inflation up by just 4 basis points; the European team's equivalent estimate for core HICP inflation runs between 3 and 6 basis points.
The report is careful to note who absorbs the hit unevenly. Emerging market economies in Central and Eastern Europe and in Asia face the largest headline inflation sensitivities, given higher energy intensity in consumer price baskets. Oil exporters — Canada and several Latin American economies in particular — actually benefit on the growth side from higher prices, a divergence that matters when reading aggregated global numbers.
The Upside Scenario: When $100 Oil Changes Everything
Goldman's second scenario is the one that carries the real hawkish bite. If Strait of Hormuz volumes remain flat for five additional weeks — not five days — and oil prices spike to around $100 per barrel before normalizing over the course of 2026, the macro math shifts materially.
In that environment, the global GDP drag widens to 0.4 percentage points. Headline inflation rises by 0.7 percentage points. The impact is not symmetric across regions: emerging markets with high oil import dependency face the largest inflation pass-through, and the Taylor Rule simulations Goldman runs suggest that central banks in those economies would face real pressure to delay — or abandon — planned rate-cutting cycles.
Briggs and his co-authors frame the pivot point precisely: the key distinction is whether oil prices stay near current levels or breach $100. Below that threshold, the monetary policy implications are modest. Above it, the calculus changes, particularly in economies where inflation has not yet been fully brought to heel.
Financial Conditions: The Channel That Isn't in the Model
One of the report's more important observations sits apart from the oil price elasticity framework. Financial conditions have tightened by 31 basis points since the Friday before publication, according to Goldman's global Financial Conditions Index. The team notes that financial conditions have not systematically tightened in past Middle Eastern conflicts — historical data across the eight largest geopolitical risk shocks since 1990 shows a mixed picture, with some brief tightening followed by rapid normalization in most cases.
This time, the FCI moved sharply and immediately. Goldman's estimate: if that 31-basis-point tightening is sustained rather than reversed, it would shave an additional 0.3 percentage points off global GDP growth over the following year. That is an incremental drag sitting on top of the oil price channel — and unlike the energy price mechanism, it is harder to model with precision and harder to predict in duration. For investors watching cross-asset signals, this FCI tightening represents one of the more live uncertainties in Goldman's framework.
The LNG Problem and the Expectations Channel
Two further upside inflation risks receive careful treatment in the report, neither of which sits inside the standard oil-price rules of thumb.
The first is LNG supply. Qatar has announced a shutdown of its LNG production — a disruption that affects 19% of global LNG supply. Goldman's commodities team has already revised its April 2026 TTF natural gas forecast sharply higher, to 55 EUR per megawatt-hour from 36 EUR previously. The 2026 average forecast was raised more modestly, under the working assumption that supply normalizes by the end of March. Higher gas prices will add near-term inflation pressure in European and Asian economies; the US, given its reliance on domestic natural gas supply, is relatively insulated. The critical threshold to watch is $25 per mmBtu — the level that triggered large demand-destruction responses during the 2022 European energy crisis. A sustained disruption approaching that threshold would materially expand the inflation and growth impacts beyond Goldman's current base case.
The second risk is more diffuse but potentially more durable: inflation expectation de-anchoring. The report's analysis shows that a 10% increase in oil prices has historically been associated with a 4 basis point increase in long-run inflation expectations — a small number under normal circumstances. But that sensitivity is meaningfully higher when oil price shocks are large, and meaningfully higher still when inflation has recently been elevated. The post-pandemic inflation episode remains fresh in consumer memory. Goldman argues this makes expectations more sensitive than the historical baseline would suggest — a dynamic that could amplify the inflation pass-through from oil at the margin, and that would, in turn, increase pressure on central banks that are already navigating a delicate disinflation path.
What Central Banks Will — and Won't — Do
The report's monetary policy section draws on empirical analysis using oil supply shocks constructed from OPEC announcements (the Känzig 2021 methodology), regressed against three-month-ahead policy rates across a broad set of developed and emerging market economies. The finding is consistent with conventional wisdom: on average, global central banks do not respond to oil price shocks. The opposing effects — negative growth and positive inflation — roughly cancel each other out in the policy reaction function.
The qualifier matters, though. When inflation is already elevated, or when oil price shocks are large (defined as greater than 10%), central banks have historically tightened policy modestly relative to a no-shock counterfactual. The Taylor Rule simulations Goldman runs confirm the same logic: under the baseline oil price path, with a standard 50% pass-through assumption from oil costs to consumer prices, the policy rate implications across major economies are minimal. Canada, Australia and New Zealand, the Euro Area, the UK, the US, China, Japan — all show near-zero Taylor Rule-implied rate adjustments in the base case.
The hawkish scenario changes the picture, particularly for emerging markets. If oil prices rise 30% and pass-through to consumer prices is elevated — modeled as a 50% increase in the normal rate — EM economies in Central and Eastern Europe, EM Asia (ex-mainland China and India), and Latin America show meaningful Taylor Rule-implied tightening. The mechanism the team identifies is not rate hikes, but delayed cuts. Goldman has already moved its forecast for the next Bank of England cut to April and pushed the next Norges Bank cut to December, consistent with this hawkish risk materializing at the margin in developed markets as well.
Key Takeaways for Advisors and Investors
Several actionable conclusions emerge from the Goldman framework for practitioners thinking through portfolio and client positioning:
1. The baseline is not alarming, but it is not benign. A 0.1 percentage point global growth drag and a 0.2 percentage point inflation boost are modest numbers — but they arrive at a moment when many economies have limited room for error. Marginal deterioration in growth expectations, even small, can have outsized effects on asset valuations that are priced for soft landing precision.
2. The oil price level is the primary variable to monitor. $80 per barrel is manageable. $100 per barrel, if sustained, shifts the inflation and growth calculus materially and creates conditions under which EM central banks begin delaying cuts — a meaningful repricing event for fixed income across those markets.
3. Financial conditions tightening is a compounding risk, not a priced one. The 31 basis point FCI move is real and immediate. If it does not reverse, it adds a further 0.3 percentage point GDP headwind on top of the oil channel. Investors should not treat the two risks as alternatives — they are potentially cumulative.
4. Core inflation remains a stabilizer — for now. The report's consistent finding that core inflation impacts are small (less than 0.1 percentage points globally under the baseline) is important. Central banks in developed markets will likely look through headline energy-driven inflation spikes, provided core remains anchored. That calculus breaks if the expectation de-anchoring risk materializes.
5. Geographical differentiation matters more than global averages. Canada benefits. Central and Eastern European EMs face the largest headline inflation sensitivity. The US is relatively insulated on gas but not on oil. Europe is exposed on both. Advisors building global portfolios should treat the regional dispersion — not just the global aggregate — as the operative framework.
6. The Strait of Hormuz is the single most important variable in this outlook. Everything else in Goldman's framework is secondary to whether that chokepoint remains impaired, and for how long.
Footnote:
1 Briggs, Joseph, Megan Peters, and Sarah Dong. "Global Economic Impacts of the War in Iran." Goldman Sachs Global Economics Comment, Goldman Sachs & Co. LLC / Goldman Sachs International, 5 Mar. 2026.
