• Citi projects Brent crude could average $95/barrel in its base case and $130/barrel in a bull scenario by 2Q26, driven by geopolitical tensions.
  • The bank estimates global oil supply could fall short by 4.4 million barrels per day, potentially worsening to 8 MB/D if Gulf transit constraints escalate.
  • Higher oil prices may fuel inflation and impact consumer costs, with refiners and airlines facing volatility.

Citi's latest research paints a stark picture for global oil markets, warning that Brent crude prices could climb sharply over the next two years due to mounting supply risks. According to people familiar with the matter, the bank's analysis highlights a near-term tightness narrative, with base-case forecasts pointing to an average of around $95 per barrel by the second quarter of 2026, while a bull case scenario could push prices as high as $130/barrel if disruptions intensify.

The forecasts stem from Citi's assessment of geopolitical dynamics, particularly in the Middle East, where transit routes like the Strait of Hormuz face potential constraints. Efforts to secure stable oil flows have hit a snag, with the bank noting that if some Gulf countries refuse to agree to Iran's so-called 'transit toll,' supply gaps could widen dramatically. Without a deal, global markets might grapple with shortages of up to 8 million barrels per day, a scenario that would strain logistics and drive up costs for industries worldwide.

In recent weeks, oil prices have shown volatility, with Brent trading above $80/barrel as tensions simmer. Citi's energy team, led by analysts who declined to be named, emphasized that these projections reflect ongoing research rather than abrupt corporate shifts. 'What institutional investors are really focused on is regulatory stability and supply chain risks,' one source paraphrased, adding that the Middle East's trajectory remains uncertain.

Industry experts note that past shocks, such as Hormuz disruptions, have led to price spikes and short-term bottlenecks, but markets often retrace if tensions ease. For now, Citi's outlook suggests a material risk to available supply, with implications for inflation and consumer sentiment in major economies like Europe and the US. Refiners and airlines are already adjusting hedging strategies to manage potential input cost surges, while producers in sensitive regions could see windfall profits.

Attempts to reach Citi for further comment were unsuccessful, but the bank's research typically frames multiple scenarios, urging caution in interpreting exact probabilities. As negotiations over Gulf transit policies continue, stakeholders are watching for any concrete steps that could validate the upside supply risk. In the meantime, investors are pricing in higher risk premia, with energy equities showing mixed reactions in real-time trading.

Correction: An earlier version of this article misstated the timeline for Citi's forecasts; it has been updated to clarify the 2Q26 target.