Global oil markets are currently underestimating supply duration and tail risks, leading to projections that Brent crude prices could rise to $120 per barrel in the near term and potentially reach $150 per barrel in a bullish scenario, according to a research report from Citi. Ongoing geopolitical tensions in the Strait of Hormuz, coupled with emerging weather disruptions, pose significant upside risks to global inflation over the coming year.
Citi’s report expresses a bullish outlook for the near term, anticipating a price increase to $120 per barrel in the base case, which carries a 50 percent indicative likelihood. The risks to these forecasts are primarily skewed upward. Under the bullish scenario, multiple paths could push Brent prices as high as $150 per barrel. The principal factor contributing to this anticipated price surge is the ongoing conflict and the potential closure of the Strait of Hormuz. The report indicates that neither the Iranian regime nor the United States are currently in a position of sufficient economic or political distress to facilitate an immediate diplomatic resolution.
The report notes that a formal memorandum of understanding or de-escalation in tensions is unlikely before July. The timing and pace of reopening the Strait of Hormuz depend heavily on the Iranian regime, making accurate predictions difficult. It appears increasingly probable that Iran may continue to disrupt flow through the strategic waterway for some time, although a deal could eventually emerge as the regime weighs the costs of disruption against the benefits of reopening.
Citi’s analysis details how keeping the Strait of Hormuz closed allows Iran to “maximize deterrence against future attacks, maximize the present value of future oil revenues due to convex price-to-inventory dynamics, and maximize retribution for killed leadership figures.” The eventual inclination to negotiate a deal is likely to be contingent upon improvements in Iran’s internal economic conditions and a reduction in international military interventions aimed at regime change.
Despite remaining optimistic in the near term, the report suggests that the current situation may need to persist for an additional 6 to 9 months before global inventories outside of China decline to levels last observed during the second oil crisis. If recent oil output losses maintain for another six months, global expenditures on oil could increase by an additional $5 trillion to $6 trillion, raising total oil spending to 7 to 8 percent of global GDP, a level comparable to that seen during the oil shock of 1979.
Inflationary pressures are anticipated to extend beyond the energy sector. Disruptions in supply chains connected to the Strait of Hormuz, combined with adverse weather patterns, are projected to affect global food security. The report warns that agriculture price risks are also heavily tilted toward the upside in the next 6 to 12 months, facing substantial supply threats from a potential prolonged closure of the Strait and unfavorable weather conditions related to El Niño.
Published on May 22, 2026.
