Goldman Sachs has issued a stark warning that global markets are underestimating the potential for a recession stemming from the ongoing conflict in the Strait of Hormuz. In its latest macro report, the bank highlights that while markets have priced in an inflation shock due to high energy costs, they have not accounted for the broader economic impact of the conflict. The report suggests that the prolonged disruption in oil flows could lead to a severe downturn in global economic growth. The report outlines three scenarios for oil prices, with the most extreme predicting Brent crude could reach $110 per barrel if Middle East production remains significantly below normal levels. Goldman Sachs has adjusted its economic forecasts, lowering growth expectations for major economies and delaying the anticipated Federal Reserve rate cut to September 2026. The bank emphasizes that the market's current focus on inflation may soon shift to recession concerns as the conflict persists.