Goldman Sachs Sees Middle East Risk Premium Embedded in Crude Oil

Daan Struyven, co-head of global commodities research at Goldman, notes that December 2027 Brent futures have climbed 10% over the last month, while European natural gas markets now price in a 50% likelihood that LNG exports will fail to recover from current lows this winter. Despite a recent 10% rally in both Brent and WTI, crude oil options remain relatively affordable, suggesting that while the market anticipates volatility, the cost of hedging against extreme spikes has not yet reached a fever pitch.

Beyond energy, the firm assessed the upcoming U.S. midterm elections, dismissing the notion of a major regulatory overhaul for the artificial intelligence sector. Alec Phillips, chief U.S. political economist, characterized such legislative expectations as far-fetched. Even if Democrats secure control of both chambers on November 5, Republican resistance in the Senate and potential vetoes from President Trump likely ensure the status quo. This political gridlock persists as AI infrastructure continues to strain power grids, evidenced by the recent 20-year supply partnership between Microsoft and Chevron in West Texas. While AI-focused equities sustain the S&P 500, high interest rates and energy costs continue to suppress the broader market, leaving the median stock roughly 15% below its record peak.