Citi bull case Brent hitting $150 near term as oil markets under-price disruption risk

⦿ Executive Snapshot

What: Citi forecasts Brent crude oil will reach $120 per barrel near term, with a bull case of $150 due to under-priced supply disruption risks.
Who: Citi Research, International Energy Agency (IEA), Iran.
Why it matters: The forecast highlights significant risks in global oil supply and pricing dynamics, especially regarding the Strait of Hormuz, a critical chokepoint for oil transport.

Citi forecasts Brent crude will reach $120 per barrel in the near term, arguing that oil markets are currently under-pricing the risk of a prolonged supply disruption.
The bank's bull-case scenario puts Brent at $150 per barrel, premised on the Strait of Hormuz reopening only gradually during Q3 2026.
Citi estimates global oil inventories will draw by approximately 1 billion barrels over the course of 2026, underscoring the physical supply gap created by the Hormuz disruption.
The bank forecasts 2026 oil demand growth will contract by 0.6 million barrels per day but cautions against reading this as evidence of collapsed end-use demand.
Citi's 2027 central case sees Brent ranging between $80 and $90 per barrel, assuming Iran restores control of Hormuz flows and balances oil exports with demand growth expectations.

The closure of the Strait of Hormuz, through which approximately a fifth of global oil supplies pass, has been effectively closed since the outbreak of the US-Israeli conflict with Iran, marking the largest disruption on record according to the IEA.
The market's current pricing does not reflect the possibility of prolonged disruption, revealing a significant disconnect between market sentiment and actual supply fundamentals.

The immediate market consequence is a potential price spike in crude oil, with Citi's targets indicating that current pricing may not adequately account for supply risks.
In the long term, should the Strait of Hormuz remain closed longer than anticipated, a severe price correction could occur once supply normalizes, impacting global oil market stability.

Potential risks include regulatory and geopolitical factors affecting the Strait of Hormuz's reopening, which could prolong supply disruptions.
The market's dependency on Iranian oil exports and the geopolitical landscape introduces additional uncertainties that could impact pricing and supply stability.

Key forward signals include the timing and conditions under which the Strait of Hormuz reopens and Iran's ability to restore oil flows.
Monitoring global oil inventory levels and demand growth will be critical to assess the market's ability to absorb further disruptions without triggering price spikes.