Goldman Sachs Says Oil Could Crash to $40 by Year-End While BloombergNEF Says It Could Hit $91: Inside the Most Divergent Energy Forecast in a Generation

Brent crude closed the week at roughly $71.50 per barrel, its highest level in six months, after President Trump gave Iran a 10-to-15-day ultimatum to reach a nuclear agreement or face "really bad things." West Texas Intermediate settled near $66. Energy stocks had their best week of the year. And on Wall Street, two of the most respected names in commodity research published price forecasts that could not possibly both be right.

Goldman Sachs warned in a note to clients this week that Brent crude could fall below $40 per barrel by the end of 2026. BloombergNEF, the energy research arm of Bloomberg LP, published a scenario analysis showing Brent could average $91 per barrel in the fourth quarter of 2026 if Iranian supply is removed from the market. The gap between those two numbers, $51 per barrel, is the widest divergence in major-bank energy forecasts in at least 15 years.

The Goldman Sachs Bear Case

Goldman's $40 scenario rests on three pillars, each of which is plausible on its own and potentially devastating in combination.

The first is an OPEC+ production unwind. The cartel and its allies have been holding back roughly 5.8 million barrels per day of spare capacity, the largest voluntary production restraint in the organization's history. But compliance has been fraying. Iraq, Kazakhstan, and the UAE have all exceeded their quotas in recent months, and Saudi Arabia has signaled that it may prioritize market share over price stability if members continue to cheat. If OPEC+ abandons restraint and floods the market, the additional supply would overwhelm demand growth and send prices tumbling.

The second pillar is a global recession triggered by trade wars. The Supreme Court struck down the administration's broad IEEPA tariffs on Friday, but the White House immediately announced replacement duties under Section 122 of the Trade Act. If trade policy continues to escalate, the drag on global economic growth could reduce oil demand by 1 to 2 million barrels per day, according to Goldman's modeling. In a world where supply is rising and demand is falling, $40 oil is not just possible but probable.

The third factor is Iran itself, but from the opposite direction. If the United States and Iran reach a nuclear agreement within Trump's stated timeline, sanctions on Iranian crude could be partially or fully lifted. Iran currently exports approximately 1.5 million barrels per day despite sanctions, but its production capacity is closer to 3.5 million. A diplomatic breakthrough that brings an additional 1 to 2 million barrels per day onto the market would be deeply bearish for prices.

The BloombergNEF Bull Case

BloombergNEF's $91 scenario starts from the opposite end of the same geopolitical spectrum. If diplomacy fails and the United States imposes maximum enforcement of existing sanctions, or worse, takes military action against Iran's nuclear infrastructure, the resulting supply disruption could be catastrophic for oil markets.

Iran's oil exports currently flow primarily to China and India through an opaque network of tankers, intermediaries, and offshore transfers that has proven difficult for the U.S. to interdict. But a military confrontation would change the calculus entirely. Even a limited strike could prompt Iran to threaten closure of the Strait of Hormuz, the narrow waterway through which approximately 20 million barrels of oil pass each day, representing roughly 20% of global consumption.

BloombergNEF modeled a scenario in which Iranian exports are fully removed from the market starting in February 2026 and the disruption persists through year-end. Under those assumptions, Brent averages $71 per barrel in the second quarter, rising to $91 per barrel by the fourth quarter as global inventories draw down and spare capacity is exhausted.

The key variable is OPEC+'s willingness and ability to compensate. Saudi Arabia holds approximately 2 million barrels per day of spare capacity, and the UAE has roughly 1 million more. But replacing Iran's full 1.5 million barrels of current exports, plus managing the panic premium that a military confrontation in the Persian Gulf would generate, would stretch even the cartel's considerable resources.

Why the Divergence Matters

A $51 gap between two credible forecasts is not merely an academic curiosity. It has direct, measurable consequences for every sector of the economy.

At $40 Brent, U.S. shale producers would face severe financial stress. The breakeven price for the average Permian Basin well is approximately $48 per barrel, according to the Dallas Fed's latest energy survey. A sustained period below that level would trigger a wave of production curtailments, layoffs, and potential bankruptcies among smaller operators. Energy-dependent states like Texas, North Dakota, and New Mexico would see declining tax revenues and weakening employment.

At $91 Brent, the consumer impact would be immediate and punishing. Gasoline prices in the United States, currently averaging around $3.15 per gallon nationally, would likely surge above $4.50 and potentially approach $5.00 in high-cost states like California and Hawaii. That would function as a massive regressive tax on American households, hitting lower-income families hardest and potentially tipping the economy into recession through a different channel than the one Goldman envisions.

For investors, the divergence creates a uniquely challenging environment for portfolio positioning. Energy stocks, which have outperformed the broader market over the past three weeks, are priced for a world in which oil stays in the $65-to-$80 range. A move to either extreme, $40 or $91, would trigger violent repricing across the sector.

The Options Market's Verdict

One way to gauge the market's collective assessment of these tail risks is through the options market. Brent crude options skew, which measures the relative demand for puts (bearish bets) versus calls (bullish bets), has widened to its most extreme level since the banking crisis of March 2023. Demand for both deep out-of-the-money puts at $45 and calls at $85 has surged, indicating that sophisticated traders are hedging against both extremes rather than betting on a single direction.

The implied volatility term structure is also telling. Near-term options are pricing in significantly higher volatility than contracts six months out, a configuration known as backwardation that typically appears when the market expects a binary outcome in the near future. In this case, the binary event is clear: either the Iran situation escalates dramatically, or it resolves, and the price of oil will move accordingly.

What History Teaches

The last time energy forecasts diverged this sharply was in early 2020, when the combination of a Saudi-Russia price war and the emerging COVID-19 pandemic created a $70 gap between the most bullish and bearish projections. The bear case won that argument decisively, with WTI briefly trading below zero in April 2020. But the recovery was equally dramatic: within 18 months, oil had surged from negative territory to above $85.

The lesson from that episode is that extreme forecasts are not mutually exclusive across time. The oil market could very well trade at $40 in one quarter and $90 in another, depending on how geopolitical events unfold. The mistake most investors make is treating these scenarios as permanent states rather than what they are: opposite ends of a distribution that the market will traverse based on events that are inherently unpredictable.

How to Position

For individual investors, the most prudent response to this level of uncertainty is diversification rather than directional betting. Energy stocks offer some natural hedge against higher oil prices but carry significant downside risk if the bear case materializes. Treasury bonds and gold, both of which tend to perform well during periods of geopolitical stress, may offer more reliable protection regardless of which direction oil moves.

For those with a higher risk tolerance, the options market itself offers asymmetric opportunities. Purchasing out-of-the-money straddles on oil futures, which profit from large moves in either direction, is one way to express the view that the current $71 price is unlikely to persist. The cost of such positions has risen along with implied volatility, but the potential payoff in a move to $40 or $91 would dwarf the premium paid.

The only thing both Goldman Sachs and BloombergNEF agree on is that the current price of oil does not reflect the full range of outcomes ahead. In an environment where a single diplomatic conversation or military decision could move prices by $20 or more in either direction, the width of the forecast gap is not a sign of analytical failure. It is an honest reflection of a world in which the most important variable in the oil market is not supply or demand, but the decisions of a handful of people in Washington, Tehran, and Riyadh.