Quick overview

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Citi said in a note on Wednesday that it anticipates a sharp increase in oil prices as conflict-related supply disruptions worsen.

Analysts predict that Brent will reach between $110 and $120 per barrel in the coming days. The bank’s head of global commodities, Maximilian Layton, wrote in a note that the bank’s updated base case, which has a 50% probability, is predicated on 4–6 weeks of disrupted flows, or up to 11–16 million barrels per day.

According to Citi, “Brent prices will rally as the conflict continues over the coming days, to $110-120/bbl,” meaning the market will continue to rise until a political or strategic intervention is necessary.

“That might be the ‘price or market event which drives the U.S to cease its military operation, the point at which inventories are released more forcefully by the IEA and OECD, or the point at which international powers are prompted to ‘forcefully re-open the Strait,” Citi emphasized the risks of escalation.

Citi emphasized that there are still substantial risks of escalation. Brent could “reach $150/bbl” in its bull case, which has a 30% probability, and increase to as much as $200/bbl “all-in” if Iran attacks more extensive energy infrastructure or if the Strait of Hormuz is essentially closed through June.

According to the bank’s bear case, which has a mere 20% chance, prices will drop to $65–70 by year’s end—but only if a swift agreement between the US and Iran reopens the Strait.

Citi is “very bullish on aluminum,” citing low inventories and the possibility of Middle Eastern smelters reducing production, which could eliminate up to 6% of the world’s supply.