Citi: "Brent crude to fall to $60 by year-end"...Is the Middle East crisis completely over?

▲ US, Iran, Strait of Hormuz, Crude Oil/AI-generated image

A forecast has emerged that Brent crude could fall to $60 per barrel by year-end, despite the possibility of renewed tensions between the US and Iran. As a result, the normalization of supply and the continuation of the ceasefire have emerged as key variables determining the direction of oil prices, rather than Middle East risks.

According to market intelligence firm Benzinga on July 3 (local time), Citi analysts analyzed that the memorandum of understanding signed between the US and Iran in mid-June is likely to be maintained even in the event of temporary clashes. Both sides lack incentives to break the agreement, and war fatigue is also evident, they judged.

Citi advised using any summer oil price rebound as a selling opportunity. Brent crude is expected to fall to a range of $60 to $65 per barrel by year-end. This places more weight on the possibility of a recovery in oil flows and a trend of easing tensions pushing prices down, rather than short-term geopolitical instability.

Oil shipments passing through the Strait of Hormuz also showed signs of recovery. The report pointed out that oil shipments through the strait increased to 7 million barrels per day. While this is less than the 15 million barrels per day before the conflict, the actual volume could be higher than official figures, considering that some ships operate with their position transmitters turned off for security reasons.

Other investment banks have also lowered their oil price forecasts. Morgan Stanley (MS) lowered its Q4 Brent crude forecast from $80 to $75 per barrel. Its year-end 2027 target was also lowered from $80 to $70. The reason cited was that tanker flows through the Strait of Hormuz are returning to pre-conflict levels.

Goldman Sachs also adjusted its forecasts. Goldman Sachs expects the average Brent crude price to be $80 per barrel in Q4 2026 and $75 per barrel in 2027. Western Texas Intermediate (WTI) forecasts were presented as $75 and $70 respectively. Persian Gulf oil exports are expected to recover to pre-war levels by the end of July, one month earlier than previously anticipated.

However, the Strait of Hormuz variable has not completely disappeared. Kazem Gharibabadi, Iran's Deputy Minister for Legal and International Affairs, stated after the US Central Command (CENTCOM) security meeting in Bahrain that the Strait of Hormuz is under Tehran's control. The core of Citi's outlook is that Middle East tensions will remain a short-term flare-up, and the recovery of oil supply will lead to downward pressure on prices.

[Key Summary of the Article]

-Citi forecasts that Brent crude could fall to $60-$65 per barrel by year-end, with the ceasefire trend maintained despite the possibility of temporary clashes between the US and Iran.

-Oil shipments through the Strait of Hormuz have recovered to 7 million barrels per day, and analysis suggests the actual volume could be higher than official figures.

-Morgan Stanley and Goldman Sachs also lowered their Brent crude and WTI forecasts, citing the recovery of oil flows.

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