Global economy faces inflation and growth test amid escalating conflict in Iran - Goldman

A temporary surge in oil prices to $100 per barrel could slow global growth by 0.4 percentage point, Goldman Sachs analysts said on Thursday, as a widening conflict in Iran chokes off vital Middle East oil and gas flows.

Under its baseline forecast, Goldman expects oil prices to increase a bit further before moderating to $76 per barrel on average in the first quarter of 2026 and $65 in the fourth quarter.

In an upside scenario, it expects oil prices to rise to about $100 per barrel, before normalizing over the course of 2026.

• Under its baseline forecast, Goldman estimates a "modest" 0.1 pp drag on global GDP growth and a 0.2 pp boost to global headline inflation.

• A jump to $100 per barrel could fuel a 0.7 pp rise in global headline inflation.

• Central banks have historically not reacted directly to oil shocks, but tend to tighten policy modestly when inflation is elevated, or price shocks are large, the brokerage said.

• Global monetary policy outlook will be mostly unaffected under the baseline forecast.

• However, policy could turn more hawkish - potentially through a delay in rate cuts in emerging markets - if oil prices hit $100 per barrel or if higher costs pass through to consumer prices at a higher-than-normal rate.

• Higher oil prices are expected to weigh on real incomes and consumer spending, while oil exporters such as Canada and several Latin American economies may benefit.

-Reporting by Akriti Shah and Siddarth S in Bengaluru; Editing by Sriraj Kalluvila/Reuters