Citi has sharply revised down its Brent crude price forecasts after the United States and Iran signed a memorandum of understanding aimed at ending the conflict in the Gulf, with the bank now expecting Strait of Hormuz trade flows to resume and normalize in the weeks ahead.
New quarterly targets place average Brent at $75 per barrel in the third quarter and $70 per barrel in the fourth quarter of 2026. The bank’s 2027 outlook dropped to $65 per barrel from a prior estimate of $80, a move that effectively elevates what had been Citi’s bear-case scenario into its new base case.
Citi assigned a 60% probability to that base case. That base case is working under the assumption that oil flows in the Strait of Hormuz would be normalized by the end of July, and that the memorandum between Iran and the US is officially signed.
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It has since been confirmed by US officials that both the United States and Iran had signed the MOU.
Despite the MoU news sending Brent futures more than 4% lower to around $83.23 a barrel, Citi’s analysts believe the market has not yet fully priced in what a durable shipping normalization would actually mean for oil. According to the bank, crude prices would likely sit $10 to $15 per barrel below current levels if markets were truly reflecting a medium-term resolution of Hormuz flows.
That gap between current pricing and a fully priced-in resolution is central to Citi’s trade recommendation. The bank flagged limited U.S. appetite for renewed conflict and Iran’s willingness to engage as factors supporting a strategy of selling summer oil price rallies rather than chasing them.
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