Investing.com -- Rising tensions between the United States and its geopolitical rivals are casting a long shadow over oil markets, Citi said in its latest Oil Monitor report, citing binary risks tied to developments with Iran and Russia.
“Geopolitics remain pivotal for the next move in oil up to $70 Brent, or down to the $50s,” Citi analysts wrote.
That outlook is said to be shaped by deteriorating progress in U.S.-Iran nuclear talks and faltering diplomacy between the U.S. and Russia over Ukraine.
Citi highlighted recent reporting by CNN that “Israel might be considering an attack on Iranian nuclear facilities,” based on new U.S. intelligence.
The news triggered a sharp rally in Brent crude to nearly $67 before retreating to under $65. Citi noted this scenario could present a major supply shock, with “a tail risk of Iran’s oil production and exports being hit by as much as ~1-m b/d.”
Despite this, Citi believes escalation may be part of a negotiating strategy: “Escalate to de-escalate,” analysts wrote, pointing to the possibility that heightened threats are intended to strengthen bargaining positions.
“We continue to see the probabilities skewed toward a U.S.-Iran deal,” they added, though they acknowledged “current highly binary geopolitical risks.”
Meanwhile, progress with Russia also appears stalled. “Russia remains opposed to a ceasefire,” Citi noted, even as the European Union rolled out tougher sanctions. A much-anticipated meeting between Russia and Ukraine in Turkey and a Trump-Putin call ultimately “showed little movement.”
Brent has traded in a $60–$66 range this month, impacted by “tariffs and geopolitical catalysts.” Citi reiterated its near-term Brent forecast of $60, with the next move likely hinging on whether diplomacy with Iran and Russia yields resolution or renewed escalation.