Goldman Sachs raises Latin America inflation forecasts as oil shock filters through region

Published: 2026-05-02 10:45:07 ET GS

Published on 05/02/2026 at 10:45 am EDT

The oil price surge triggered by the closure of the Strait of Hormuz is driving inflation higher across Latin America and forcing a broad reassessment of the region's macroeconomic outlook, Goldman Sachs has warned, with price pressures now spreading well beyond the energy sector into fertilisers, chemicals and other industrial inputs.

In a research note on the region, the US bank revised its Brent crude price forecast upward, now projecting the benchmark will ease only to $90 a barrel by December 2026 — up from a previous forecast of $80 — and to $80 a barrel by the end of 2027. The revision reflects both a more prolonged disruption to energy flows from the Middle East and a slower-than-expected recovery in production. The implication for Latin America is a higher-for-longer oil price environment at a moment when central banks across the region had not yet completed their disinflation cycles.

Goldman Sachs estimates that a 10% rise in oil prices pushes Latin American inflation higher by approximately 30 basis points, a relationship that becomes more consequential the longer prices remain elevated. The bank revised its regional inflation forecast to 8% for 2026, up from a previous estimate of 7.8%, moderating to 5.8% in 2027.

The revision is uneven across countries, owing to differences in energy exposure, subsidy policy and exchange rate pass-through. Argentina leads the upward revisions with a forecast of 29%, up 100 basis points. Goldman Sachs estimates that fuel prices have risen close to 30% so far this year and roughly 20% since the US-Israeli attack on Iran in late February, with further increases likely if international prices hold at current levels.

Among the larger economies, Colombia is forecast at 6.5%, up 20 basis points, while Chile is revised to 4.2%, up 40 basis points, and Peru to 3.6%, also up 40 basis points. Brazil is revised modestly to 5%, up 20 basis points. Mexico is left unchanged at 4.5%, while Ecuador edges up 30 basis points to 2.7%.

Beyond fuel: a more structural inflation dynamic

Goldman Sachs flags that the risk to consumer prices is broadening beyond fuel, introducing a more persistent dynamic. As the energy shock filters through supply chains, inflation is acquiring a structural character rather than remaining a one-off price adjustment, a pattern that complicates central banks' ability to look through it.

The degree of pass-through from international to domestic prices varies sharply across the region. In Chile and Peru, where domestic prices track global benchmarks more closely, the inflationary impact has been more immediate and pronounced. By contrast, Brazil, Colombia and Mexico have deployed subsidies or other fiscal mechanisms to cushion the blow, containing near-term inflation at the cost of growing fiscal distortions. As Intellinews has previously reported, the Bank of Spain identified a similar pattern in its own assessment of the conflict's regional impact, noting that the choice between absorbing the cost fiscally or passing it on to consumers is shaping both inflation outcomes and medium-term debt trajectories.

Growth: exporters gain, importers lose

The conflict is also introducing a clearer divergence in growth prospects between the region's net energy exporters and importers, a divide that Fitch Ratings and UBS have also flagged in separate assessments published since the conflict began.

Goldman Sachs projects regional growth of 1.9% in 2026, slightly below its previous forecast of 2%, with sharper cuts concentrated in specific countries. Mexico's growth estimate is lowered to 1.3%, while Chile is revised down to 1.9%. Both are net energy importers whose terms of trade deteriorate as oil prices rise.

Argentina, Brazil, Colombia and Ecuador, as net exporters, benefit from higher crude revenues that partially offset domestic inflationary pressures. The bank identifies oil export income as a meaningful cushion for those countries' external accounts — a point that Fitch's cross-sector analysis also underscored, noting that the terms-of-trade improvement is most consequential for Argentina, which has been rebuilding its foreign exchange reserves under its IMF programme.

Goldman Sachs also warns that the growth impact is not confined to trade flows. It estimates that a tightening of 10 basis points in global financial conditions reduces Latin American growth by a commensurate 10 basis points, linking the energy shock to the broader international financial environment in a way that amplifies its effect on the region.

Central banks: limited room to manoeuvre

Goldman Sachs expects most central banks in the region to look through the oil-driven supply shock, provided inflation expectations remain anchored. But it acknowledges that the room to do so is narrowing in several countries.

In Brazil, the deterioration in the inflation outlook has prompted the bank to revise its forecast for the benchmark Selic rate upward to 13.25% by end-2026, reflecting a more cautious monetary stance than markets had previously anticipated. That is a significant shift for a country whose central bank had been approaching the start of an easing cycle. And one that compounds pressure on a corporate sector already carrying, according to Fitch, the weakest interest coverage ratios of any major emerging market.

The bank also introduces a risk scenario in which a deeper or more prolonged energy shock shifts the focus of monetary policy from inflation to growth: a more complex dilemma that would confront central banks with conflicting signals and limited policy space.

For now, the base case is one of caution rather than crisis. But Goldman Sachs is clear that the trajectory will depend on how quickly the Middle East conflict resolves and energy supply normalises. Until that happens, Latin America's macroeconomic managers face a narrowing path between containing inflation and avoiding a growth slowdown they did not cause and cannot control.