Goldman Sachs draws 3 major conclusions from oil supply shocks

Global business relies on stability to operate, and oil prices are the cornerstone of that stability. But oil supply shocks caused by the Iran war, which just concluded its fourth week, have upended that stability, sending the global economy into a tailspin, France 24 reported.

Goldman Sachs analysts spent their last note trying to estimate the impact of higher oil prices on the U.S. labor market, and they came to three conclusions about where the U.S. labor market is headed.

At first, the stated U.S. rationale for the attack was to stop Iran’s nuclear ambitions. However, many pointed out that the Trump administration said last year that the U.S. and Israel had already “obliterated” Iran’s nuclear capacity.

Israeli officials at the time did not agree with the “obliterated” adjective, but the Israel Atomic Energy Commission and IDF Chief of Staff Lt. Gen. Eyal Zamir both agreed that the attacks set Iran’s nuclear ambitions “back by years, I repeat, years.”

Well, just seven months later, they are back bombing Iran, but this time the objective is less clear and has constantly shifted, The Washington Post reported.

Once again, “stability” is the name of the game in the global economy.

But since we don’t currently have that, we have to rely on Goldman Sachs analysts to tell us what will happen to U.S. labor next, based on their expertise.

Brent crude futures rose toward $111 per barrel on Friday, March 27, near the highest level since June 2022, on reports that the U.S. is considering sending up to 10,000 additional ground troops to the region, per Axios, potentially embroiling the U.S. in a much longer conflict in the Middle East.

The last time gas prices were this high was following Russia’s invasion of Ukraine in 2022, when Brent crude prices reached $123.64 per barrel.

• The impact of higher gas prices on the labor market is more muted than it was 50 years ago.

• Job loss estimates from different sources generally align with the Federal Reserve‘s basic model.

• Traditional job gains in certain industries from increased prices will be more subtle this time.

“First, we find that while higher oil prices still tend to reduce job growth and raise unemployment, the impact is roughly one-third as large as in 1975-1999, likely reflecting the lower oil intensity of U.S. GDP and surge in domestic shale production,” Goldman analysts said.

The second conclusion the team came to was that other data sources agree with the Federal Reserve’s FRB/US report’s conclusion. “These estimates suggest that the oil price shock implied by our strategists’ baseline oil price forecast would raise the unemployment rate by 0.1pp, which is one of the reasons that we expect the unemployment rate to rise 0.2pp in total to 4.6% by 2026Q3,” Goldman said.

That impact mostly reflects lower hiring and modestly higher layoffs in industries most exposed to discretionary spending.

Goldman’s final conclusion: Any follow-on job gains in certain industries that have been observed in the past will be more muted now.

“Significant improvements in extraction productivity in recent years suggest that job gains will likely be more limited this time, even if oil production expands. Accounting for both job gains in the energy industry and job losses elsewhere, we estimate that higher oil prices will reduce payroll growth by roughly 10k per month on net through year-end,” Goldman says.

This week, Chevron CEO Mike Wirth, speaking at the CERAWeek oil conference in Houston, was blunt about the current state of the oil industry.

“They’re unpredictable,” Wirth told Bloomberg Television. “They’re volatile. The market opened up last night in Asia with some anxiety.

Related: Morgan Stanley names top auto pick if gas prices stay high

“Things in the Middle East looked like they were going to escalate,” he added. “The president came out with a message saying, ‘No, we’re removing this deadline that we imposed over the weekend,’ and the markets traded off. The fundamentals are very tight out there.

“It will take time to rebuild inventories of the right grades of crude, the right types of products around the world to meet the demand,” Wirth explained, according to SeekingAlpha.

As for when production will get back to normal, Wirth says it is “an uncertainty that we’re going to have to deal with as we go forward. We’ve seen tightness in distillate products like diesel and jet fuel, and in particular, Asia is facing some real concerns about supply.”

And while oil futures have gone haywire since the war started, Wirth says they have not fully priced in the scale of the supply disruption that was triggered by the closure of the Strait of Hormuz.

The market is instead trading on “scant information” and “perception,” while the physical supply of oil is probably tighter than the futures contracts suggest.

Related: U.S. economy will show resilience, despite rising oil prices

This story was originally published by TheStreet on Mar 29, 2026, where it first appeared in the Employment section. Add TheStreet as a Preferred Source by clicking here.