Citigroup: Strait of Hormuz Crisis Will Reshape Commodity Pricing, Oil Prices Could Surge to $180-$210 per Barrel

On March 23, Citigroup Research noted in its Commodity Market Outlook report for the second quarter of 2026 that the supply chain disruptions in the Strait of Hormuz due to the Iran conflict are triggering an energy shock comparable to the oil crisis of the 1970s, significantly impacting the global commodity market. The report states that under the baseline scenario, Brent crude oil prices may rise to $120 per barrel in the short term, gold may see a long-term increase to $5,000 per ounce, while industrial metals may face pressure in the short term due to risk aversion. The report warns that if supply disruptions persist, oil prices could soar to $180 to $210 per barrel. In terms of investment strategy, Citigroup recommends allocating commodities to hedge against inflationary risks and emphasizes that the timing of gold investment depends on the evolution of geopolitical conflicts.

Currently, the daily disruption of crude oil and products in the Strait of Hormuz amounts to 11 to 16 million barrels, accounting for 20% of global trade volume. This significant supply gap is directly reshaping the price center of the energy market. Currently, global oil costs have reached 4.2% of global GDP, up two percentage points since the beginning of the year, approaching the levels seen during the second oil crisis.

The oil market is at the core of this shock. Citigroup Research has set three scenarios: baseline, optimistic, and pessimistic. Under the baseline scenario (50% probability), Brent crude oil prices are expected to rise to at least $120 per barrel within the next month, with an average price of $95 per barrel in the second quarter of 2026, before falling back to the $70 to $80 per barrel range by the end of the year. However, in the optimistic scenario (30% probability), if geopolitical conflicts spiral out of control and supply disruptions continue until June, Brent oil prices could reach $150 per barrel, with full costs including refinery premiums potentially as high as $180 to $210 per barrel. The pessimistic scenario (20% probability) assumes a rapid de-escalation of the conflict, resulting in oil prices falling back to $65 to $70 per barrel.

In the precious metals sector, short-term and medium-to-long-term trends for gold have diverged. Citigroup has lowered its 0-3 month target price for gold to $4,300 per ounce, while raising its 6-12 month target price to $5,000 per ounce. Under the baseline scenario, gold prices may initially decline before rising, ultimately reaching $5,000 per ounce. The report indicates that gold’s current performance is more akin to that of a risk asset, facing short-term pressures from retail investor sell-offs and a strengthening dollar. However, looking back at the oil shock period of the 1970s, gold performed strongly during stock market corrections, providing a historical reference for its long-term safe-haven value. The expectation for silver has shifted from outperforming gold to underperforming, with the 0-3 month target price downgraded to $60 per ounce, and the 6-12 month target price at $80 per ounce, primarily due to a narrowing global silver supply gap and a projected 16% decrease in silver usage for solar panels by 2026.

The industrial metals sector is generally under pressure in the short term. Citigroup expects that during the closure of the Strait of Hormuz, investors will lower risk exposure and revise down growth expectations, leading to lower prices for industrial metals. The 0-3 month target price for copper is set at $11,000 per ton, with a 6-12 month target price of $12,000 per ton. Although data center construction is expected to contribute about 200,000 tons of growth in copper demand annually from 2026 to 2027, this AI-driven theme is predicted to slow down by the end of the 2020s. Aluminum is a relatively favored variety by Citigroup, with a 0-3 month target price of $3,300 per ton and a 6-12 month target price of $3,500 per ton. Under the baseline scenario, the aluminum market itself is expected to have a shortage of about 1.3 million tons, and with the disruption in the Strait of Hormuz potentially affecting bauxite transportation in the Middle East, aluminum prices could rise to $4,000 per ton. Other metals such as nickel, zinc, lead, and tin are all facing short-term pressures, while lithium prices are expected to continue to decline, with the 6-12 month target price for lithium carbonate in China set at only $15,000 per ton.