Oil prices have sharply declined from their recent peaks, even as disruptions in the Hormuz Strait continue. Markets are reassessing supply risks and slowing global demand, according to reports from Investing.com citing analysts from Citigroup.
Brent crude had seen a notable increase in recent days, reaching between 125 and 126 dollars per barrel, before retreating again to a range of 100 to 114 dollars, depending on various contract maturities. Investors believe that the market is still capable of absorbing part of the shock from the U.S.-Israeli war on Iran.
Details of the Event
Citigroup explained that the recent decline of around 14 dollars within a week resulted from several stabilizing factors, including withdrawals from strategic oil reserves, rising global inventories, and weak oil consumption in developing economies.
The bank noted that China played a significant role in calming the market after sharply reducing its oil imports, which fell by approximately 2.4 million barrels per day during April and May compared to an average of 11.6 million barrels per day in 2025.
Background & Context
These movements come at a time when the Hormuz Strait continues to experience ongoing disruptions since the outbreak of the war. The disruption of navigation through the strait threatens about 20% of global oil supplies transported by sea, in addition to vast quantities of liquefied natural gas.
Despite the recent decline, Citigroup maintained its positive short-term outlook for oil prices, keeping its forecast for Brent crude over the next three months at 120 dollars per barrel.
Impact & Consequences
The bank anticipates that the average price of Brent will reach around 110 dollars during the second quarter of the year, before dropping to 95 dollars in the third quarter, and then to 80 dollars in the fourth quarter.
Bank analysts believe that markets may still be "underestimating the pricing of risks associated with prolonged disruptions in the strait," especially if negotiations between Washington and Tehran remain complex and stalled.
Regional Significance
These developments directly affect oil prices in the Arab region, where many countries heavily rely on oil revenues. The ongoing disruptions in the Hormuz Strait could also lead to increased geopolitical tensions in the area.
In conclusion, the oil landscape remains complex, as supply and demand factors intertwine with political situations, necessitating close monitoring by investors and decision-makers.