Goldman Sachs analysts warned that oil infrastructure damage and efforts to refill strategic oil reserves could keep prices elevated longer than many expect, even if the Iran war winds down soon.

Market watchers are increasingly pessimistic about a swift return to normal for oil markets given Iran's incentive to target infrastructure and halt trade in order to inflict maximum economic pain.

Three weeks into the “four to five week” U.S.-Israeli war in Iran, the long-term implications for oil markets and economies are coming into focus.

“The risks to oil prices remain skewed to the upside on net both in the near-term and in 2027,” wrote Goldman Sachs oil analysts in a note on Thursday. Goldman’s analysts say the conflict in Iran could shift oil demand and supply enough to keep oil prices higher long-term, even if the Strait of Hormuz, the critical chokepoint that Iran has effectively closed, reopens next month.

That could have far-reaching consequences for the economy and consumers. The price of crude oil accounts for more than 50% of the cost of gasoline, making oil a primary driver of inflation. The national average gas price rose for a 19th consecutive day on Friday, and is now more than 30% higher than before the war. Brent crude, the global oil benchmark, recently traded at $112 a barrel, up 55% since the war began.

Inflation was already elevated before conflict in the Middle East caused prices for oil and many other key industrial inputs to surge this month. Economists worry the war's inflationary pressure, coupled with a frozen labor market, raises the risk of stagflation, the economic equivalent of being stuck between a rock and a hard place.

The Trump administration, aware of Americans’ sensitivity to gas prices, is considering a number of ways to boost global oil supplies. The U.S. has lifted sanctions on Russian oil at sea, and Treasury Secretary Scott Bessent this week floated the idea of doing the same for Iranian oil. The Pentagon has reportedly ramped up strikes on Iranian naval vessels and drones around the strait, potentially clearing the way for naval escorts.

One of the biggest risks to oil prices, regardless of what happens in the strait, is that infrastructure damage causes a large and prolonged decrease in supply. The countries surrounding the Persian Gulf accounted for about 30% of global oil production last year, but their operations have been significantly disrupted this month by Iranian drone and missile strikes.

Energy infrastructure has become a prime target for both sides of the conflict. Israel on Wednesday bombed Iran’s South Pars gas field, prompting Iran to strike the world’s largest liquefied natural gas (LNG) export facility in Qatar. The CEO of state-owned QatarEnergy told Reuters on Thursday that attack had taken out 17% of the facility’s export capacity. He said repairs could take up to five years, disrupting the flow of nearly 13 million tons of LNG annually.

“What started as a large but transitory disruption has now escalated to a larger multi-year shift to the supply-demand outlook,” said Morgan Stanley analysts of the attacks on LNG infrastructure. Before the war, Morgan Stanley estimated a global LNG surplus of 8 million tons; after this week, they expect a 15 million ton deficit.

According to Goldman Sachs, the post-war supply crunch will likely be exacerbated by a race across the globe to replenish depleted oil reserves. Members of the International Energy Agency agreed earlier this month to release 400 million barrels from their strategic reserves to ease prices. Policymakers are likely to replace those barrels and increase their reserve targets “as they recognize how uncertain oil supply is in this geopolitical environment,” according to Goldman.

Only a few factors are likely to put downward pressure on prices. Once geopolitical risks recede, OPEC could activate spare production capacity. In past supply crises, Saudi Arabia and the United Arab Emirates have increased production enough to offset 70% to 90% of losses in just half a year, according to Goldman. Higher oil prices could also drive a shift toward alternative energy sources or persistent changes in consumer behavior that reduce oil demand over the long run.

To be sure, it’s not guaranteed that traffic through the Strait of Hormuz returns to normal anytime soon. “We believe investors should be cautious about assuming a swift resumption of energy flows, which we think could only be fully restored by a combination of military and political means,” wrote UBS’s chief investment office on Friday.

And many market watchers see little incentive for Iran to back down militarily or compromise politically. Its stockpile of low-cost drones are still capable of damaging critical infrastructure across the region, increasing the cost of war for the U.S. and its Gulf allies.

The efficiency of Iran’s economic warfare is one reason some on Wall Street worry there’s no going back to normal. “This is not an oil shock,” said Mark Malek, chief investment officer at Siebert Financial on Friday, “it is a structural shift in how energy risk is priced globally.”

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