Citi has raised its third-quarter Brent crude forecast to $80 per barrel, up from $75, as the U.S.-Iran war continues and repeated diplomatic efforts have failed to restore normal oil traffic through the Strait of Hormuz — the world's most critical oil transit chokepoint, through which roughly a fifth of global daily petroleum consumption normally passes.

The bank still expects the conflict to be resolved eventually, but the five-month war has persisted longer than Citi anticipated, keeping a higher degree of geopolitical risk priced into crude. The bank left its fourth-quarter Brent forecast unchanged at $70 per barrel and continues to project the benchmark averaging $65 in 2027.

Brent futures were trading at $83.11 per barrel on Friday afternoon, up $0.62, while West Texas Intermediate gained $0.51 to reach $77.80. Prices received a lift from concerns surrounding U.S.-Iran negotiations, after Brent had briefly dipped below $80 earlier in the week following renewed optimism about a potential Hormuz agreement.

Citi's latest revision represents another step back from the bank's aggressively bearish stance earlier this summer. In early July, Citi recommended selling summer rallies and predicted Brent would decline to $60–$65 by year-end, based on assumptions that Hormuz traffic would normalize and that Washington and Tehran were moving toward a broader agreement.

Neither assumption has held up. Shipping through Hormuz remains heavily constrained, Middle East oil production is still well below pre-war levels, and attacks on commercial vessels have continued even as negotiators discuss possible arrangements for the waterway. The disruption has forced some Gulf exporters to reroute shipments around the Arabian Peninsula, adding days to voyages and pushing freight rates higher across the region.

Citi's December outlook had projected Brent averaging just $62 for all of 2026, with a bearish scenario of $50 and a bullish case of $75 if geopolitical disruptions actually materialized. Those disruptions did in fact occur. Brent spent much of the second quarter well above those projected levels after the war removed millions of barrels per day from the market.

Goldman Sachs is less convinced that prices are poised for the fourth-quarter drop Citi envisions. The bank stated earlier this week that Brent should remain between $80 and $90 until markets receive either confirmation of a U.S.-Iran agreement or a significant escalation in attacks. Goldman also flagged the possibility of prices reaching as high as $120 per barrel should Hormuz remain closed for an extended period.

Citi's $70 fourth-quarter forecast now hinges on the same factor that undermined its July call: more barrels successfully passing through Hormuz.

Source: OilPrice.com