Citi Lifts Q3 Brent Forecast to $86 on Prolonged Strait of Hormuz Closure

Citigroup raised its price forecast for third-quarter 2026 Brent crude oil to $86 per barrel, a notable increase from its previous estimate of $80. The bank attributed the revision in a Thursday note to the ongoing and extended closure of the Strait of Hormuz, a critical chokepoint for global energy supplies.

Short-Term Spike, Long-Term Stability

While the Q3 forecast was revised upward, Citi maintained its longer-term price expectations for the global oil benchmark. The bank's forecasts for the fourth quarter of 2026 and for the full year 2027 remain unchanged at $70 and $65 per barrel, respectively.

This outlook suggests that Citi's analysts view the current supply disruption as a temporary factor. The bank anticipates a resolution that would allow the Strait of Hormuz to reopen in the fourth quarter of 2026.

Geopolitical Outlook

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According to Citi, Iran faces significant economic pressure to reopen the strait, stemming from lost oil revenue and a sharp decline in its currency. The bank's analysis suggests a potential for a "near-term escalation in the Middle East" that could, counterintuitively, spur renewed diplomatic efforts and lead to a resolution.

Divergent Views on Gas Markets

The disruption in the strait is also impacting natural gas forecasts, particularly in Europe. Citi raised its price targets for the European benchmark TTF to €60 per megawatt-hour for Q3 and €56 per megawatt-hour for Q4, as the market prices in continued disruptions to liquefied natural gas (LNG) exports.

Conversely, the bank lowered its third-quarter forecast for U.S. Henry Hub natural gas to $2.90 per million British thermal units (MMBtu). This downward revision was attributed to domestic factors, specifically an expected increase in U.S. production.