Citi on Tuesday warned that oil markets appear to be under-pricing the risk of an extended supply disruption, and said it expects Brent crude to rise to $120 a barrel in the near term.
In a scenario the bank labels bullish, Brent could climb to $150 a barrel if the Strait of Hormuz were to gradually re-open during the third quarter. That outcome remains conditional on a restoration of flows through the key chokepoint, according to the bank's framework.
Market moves on the day showed prices settling lower after public comments by Vice President JD Vance that the United States and Iran had made progress in talks and that neither side appeared to want a return to military action. Brent futures for July settled down at $111.28 a barrel on the session referenced by the bank.
Looking further ahead, Citi described its 2027 oil outlook as difficult to predict. Its central case projects Brent trading in a range between $80 and $90 per barrel, a scenario that assumes Iran maintains control of flows through the Strait of Hormuz while balancing oil export volumes with expectations for demand growth.
On consumption trends, Citi forecasts that oil demand growth in 2026 will contract by 0.6 million barrels per day. The bank noted that apparent weakness in demand figures may overstate declines in actual end-use consumption, because inventory drawdowns and refinery production cuts can mask what it calls relatively limited end-use demand destruction.
Finally, Citi estimates that global oil inventories will fall by about 1 billion barrels over the course of this year.
Context and implications
The bank's near-term and bull-case price trajectories are explicitly tied to developments in the Strait of Hormuz and to the balance between exports and demand growth. Citi's inventory and demand assumptions underpin its expectation of tighter market conditions this year.