• Citi (C) warns oil is underpriced given escalating geopolitical tail risks, with Brent poised to hit $110–$120 per barrel in the coming days.
  • The bank’s bull case envisions Brent reaching $150 if energy infrastructure is targeted, while a de-escalation could see prices retreat to ~$70.
  • Long-term base case for 2027 remains $80–$90, contingent on conflict resolution and Iran leadership shifts.

Geopolitical Risk Dominates

Oil markets are underpricing the risk of a major supply disruption, according to Citi, which expects Brent crude to surge to $110–$120 per barrel in the near term. The bank’s analysts point to escalating conflict involving the U.S., Israel, and Iran, with potential attacks on Middle East energy infrastructure or a blockade of the Strait of Hormuz threatening global flows. “The market is currently pricing in a relatively benign outcome, but tail risks are high,” a Citi strategist said, speaking on condition of anonymity.

In a bull-case scenario, Brent could spike to $150 if key facilities are hit, Citi said. The warning comes as oil prices have gyrated between $65 and $120 this year, driven by headline-driven volatility. Markets entered 2026 expecting oversupply, but those concerns have been overshadowed by geopolitical turmoil.

Supply-Side Vulnerabilities

The Strait of Hormuz remains the single biggest chokepoint. HSBC (HSBC) has warned that a blockade would neutralize 4.6 million barrels per day of OPEC+ spare capacity, much of which is stranded behind the strait. U.S. restrictions on Russian oil purchases have already tightened supply, while Chinese buying continues to support prices. “Without a de-escalation in the coming weeks, the risk of a sustained spike is real,” added the Citi analyst.

Mixed Views on Long Term

Citi’s 2027 base case of $80–$90 per barrel assumes that tensions ease and Iran leadership changes lead to a more stable environment. However, the bank acknowledges that this depends on a swift resolution. Goldman Sachs (GOLD) has also lifted its oil forecasts on weaker Middle East output, while other analysts caution that oversupply could re-emerge if conflicts fade. For now, the focus remains on the next few days.

Correction: An earlier version of this article misstated Citi’s near-term Brent forecast. It is $110–$120, not $120.

Citi’s forecast reflects a geopolitically driven bull case where oil is currently underpriced relative to tail-risk exposure. The situation remains fluid and highly dependent on Middle East conflict dynamics and potential U.S./Iran policy shifts.