"We see three reasons why the 10-week closure of the Strait of Hormuz has hurt global growth only moderately so far," Hatzius wrote in a note to clients on Monday.
First, oil prices have not risen as much as feared, partly due to unusually high pre-war inventories and partly because markets maintained confidence that extreme consumer price increases would eventually prompt a U.S. policy shift.
Second, physical shortages in areas such as jet fuel have been absorbed through "relatively painless forms of demand destruction," including a large shift to renewables in China and reduced flight schedules on lower-value routes globally.
Third, fiscal policy, the AI boom, and broadly supportive financial conditions have cushioned the blow throughout the year.
Under Goldman’s baseline of a gradual Strait reopening beginning soon and completing by late June, the bank sees Brent crude prices stable near-term before edging down to $90 per barrel by year-end.
Goldman nudged its 12-month U.S. recession probability down 5 percentage points to 25%, citing solid private domestic final sales growth of 2.5% in the first quarter and a better-than-expected 115,000 increase in April nonfarm payrolls.
However, Hatzius cautioned that recession risk remains 5 percentage points above pre-war levels, with consumers facing headwinds from fading tax refund boosts, higher gas prices, slowing wage growth, and a personal saving rate that has already fallen to 3.6%, "the lowest level in three years."
