Goldman Warns Hormuz Flows May Never Recover as Iraq Pivots to Ceyhan Pipeline
Iraq's southern output has collapsed 70%, forcing a Kurdish pipeline pivot that Goldman Sachs warns may not close the gap even after Hormuz's preliminary peace deal.
Goldman Sachs analysts warned in mid-June (2026-06-18) that tanker traffic through the Strait of Hormuz may never return to pre-war levels, even after the United States and Iran signed a preliminary peace agreement the previous day (2026-06-17). The bank projected visible flows could recover to around 70% of pre-war throughput — about 13 million barrels per day — by the end of July (2026-07-31), but cited oil buyers' adaptation to alternative supply chains as a reason full restoration may not follow.6
For Iraq, that projection carries immediate fiscal weight. Crude production from the country's southern fields had fallen from 4.3 million barrels per day (bpd) before the war to just 1.3 million bpd as of early June (2026-06-03), a 70% collapse hitting a state where petroleum accounts for 90% of government revenues. Baghdad has announced plans to triple exports through the Kurdistan pipeline to the Turkish Mediterranean port of Ceyhan within three months.4
That shift faces a hard capacity limit. The Kurdistan pipeline to Ceyhan was never designed to absorb Iraq's full export volume, and tripling throughput from a suppressed base still leaves Baghdad far short of replacing the roughly 3 million bpd of southern output the war has erased. New pipeline capacity across the Gulf is measured in years, not months.4,7
The Strait itself, through which 20% of world oil and seaborne gas flowed before the conflict, had been effectively closed for approaching 11 weeks as of late May (2026-05-21). As of mid-June, Goldman reported that visible flows at the chokepoint stood at just 1.3 million bpd, with another 1.6 million bpd moving on vessels that had switched off their geolocation transponders to avoid detection, Bloomberg reported citing the bank's analysts.6,1
Gulf producers moved quickly to find routes around the closure. Saudi Arabia's East-West pipeline to Yanbu on the Red Sea was carrying approximately 7.5 million bpd, near its operational ceiling. Sanction waivers proliferated as importing nations secured alternative sourcing, and Persian Gulf exporters shifted rapidly from port-based to pipeline-based crude flows.6,5
The UAE has made more progress on bypass infrastructure than any other Gulf state. ADNOC chief Sultan Ahmed Al Jaber said on Wednesday (2026-05-20) that the emirate had built nearly 50% of a second pipeline routing crude through Fujairah. Abu Dhabi Crown Prince Sheikh Khaled bin Mohamed had formally accelerated the project on Friday (2026-05-15), targeting a 2027 completion that would roughly double Fujairah's existing capacity of 1.8 million bpd. Al Jaber estimated cumulative losses from the closure at more than 1 billion barrels, with approximately 100 million additional barrels lost for every further week the strait stays shut.2,3
Even assuming peace holds, Al Jaber said in May that it would take at least four months from the end of conflict to ramp oil flows back to 80% of normal. Goldman's analysts took a harder view: buyers that spent weeks establishing alternative supply chains may retain them after Hormuz reopens, making the 70% recovery estimate a ceiling rather than a way station.2,6
The preliminary US-Iran deal signed on Wednesday (2026-06-17) sets the terms — Hormuz reopens in exchange for the lifting of all sanctions against Tehran, including UN sanctions — but translating a signed document into restored tanker traffic and rebuilt logistics chains will take longer than any diplomatic timeline implies. Al Jaber was explicit on that point: more than 1 billion barrels were diverted off the strait in one event, and recovering from it is neither automatic nor immediate.6,2
ICE Brent crude front-month traded at $88.26 per barrel as of Friday's close (2026-07-18). The pace at which visible Hormuz flows climb from the current 1.3 million bpd toward Goldman's 13 million bpd estimate, and whether Iraq's three-month Ceyhan plan delivers anything close to its target, will be the clearest signals of how much of the pre-war oil trade map is actually recoverable.6,4