Citi Sees Short-Term Oil Support from Geopolitical Tensions, Predicts Prices Could Fall if Peace Deals Materialize

Citi says recent geopolitical pressures have helped lift Brent crude toward $70 a barrel, driven by tighter enforcement of sanctions on Russian and Iranian oil and other supply disruptions. The bank's base case assumes peace agreements involving Russia-Ukraine and Iran by or during the summer, which would reduce Brent to roughly $60-62 a barrel and compress diesel and gasoline refining margins by $5-10. If Russian supply disruptions sustain prices in the $65-70 range, Citi expects OPEC+ to use spare capacity to raise output.

Key Points

Geopolitical pressures and tighter enforcement of U.S. sanctions on Russian and Iranian oil have helped lift Brent from around $60 to near $70 per barrel in the past month - impacts primary on oil producers and commodity markets.
Citi's base case expects both Iran and Russia-Ukraine deals by or during the summer, which it says would lower Brent to $60-62 per barrel and reduce diesel and gasoline cracks by $5-10 - implications for refiners and fuel retailers.
If Russian supply disruptions sustain Brent in a $65-70 range, OPEC+ is likely to increase output from spare capacity; the group appears inclined to resume output increases from April, affecting producer nation strategies and global supply balances.

Global crude prices have been buoyed in the near term by geopolitical developments, according to Citi, which notes that heightened pressure from U.S. political efforts toward peace agreements involving Russia and Iran has helped support recent gains. Brent crude has climbed from roughly $60 per barrel to close to $70 over the past month, a move Citi attributes in part to more stringent enforcement of U.S. sanctions on Russian and Iranian oil, along with other supply disruptions.

The bank highlighted a recent European Union proposal - released last week - that would extend sanctions related to Russia to include ports in Georgia and Indonesia that handle Russian oil, marking the first instance of the bloc targeting ports in third countries, according to a proposal document the bank reviewed. Such measures are part of the mix Citi cites for tighter near-term supply conditions.

Citi outlined a transmission channel for U.S. influence on oil affordability: the negotiation of peace deals. Specifically, the bank said that agreements between Russia and Ukraine, and de-escalation with Iran, could directly contribute to lower crude oil and refined product prices.

In its base case, Citi expects both an Iran agreement and a Russia-Ukraine deal to be reached by or during the summer of this year. The consequences, the bank projects, would include a fall in Brent prices to about $60-62 per barrel and a reduction in diesel and gasoline cracks - the refining margin measures - by $5-10.

Conversely, Citi warns that if disruptions to Russian supply persist and keep Brent trading in a $65-70 per barrel band over the coming months, OPEC+ would likely respond by drawing on spare capacity to increase output. The group appears inclined toward restarting planned output increases from April, three OPEC+ sources said, as members prepare for peak summer demand while price strength is further supported by U.S.-Iran tensions.

The bank also noted demand-side behaviour that is supporting current flows: China has been purchasing Russian and Iranian oil at discounts to global benchmarks, both for immediate purchases and for stockpiling. Citi said it expects these discounted buying patterns to continue into 2026 so long as sanctions linked to Russia/Ukraine and Iran remain in place.

Market pricing reflected the recent developments: Brent crude futures settled 90 cents, or 1.33%, higher at $68.65 a barrel on Monday.

This assessment frames a near-term environment where geopolitical pressures and sanctions enforcement keep prices elevated, while the prospect of negotiated settlements later in the year presents a credible pathway to materially lower crude and product prices.

Risks

Timing risk - the bank's forecast depends on Iran and Russia-Ukraine deals occurring by or during the summer; failure or delay of such agreements would keep the timing of price relief uncertain, affecting energy markets and downstream fuel margins.
Supply disruption risk - continued interruptions to Russian oil supply could maintain elevated Brent prices in the $65-70 band, prompting OPEC+ policy responses and sustaining volatility for commodity traders and oil-dependent sectors.
Sanctions-driven trade patterns - discounted purchases and stockpiling by China of Russian and Iranian oil could persist into 2026 while sanctions remain in place, creating uncertainty for benchmark-linked producers and for the composition of global crude flows.

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