Markets Edition: Middle East Developments Escalate to De-Escalate
KEY TAKEAWAYS
- Escalating Middle East tensions driven by an economic blockade on Iran have pushed Brent crude oil prices over $100 injecting significant geopolitical risk and uncertainty into the global energy market outlook
- The conflict's impact on the Strait of Hormuz poses clear downside risks. While high inventories provide a buffer, a severe re-escalation threatens cyclical sectors and the energy market outlook.
- Citi Research's central case forecasts a Q4 reopening of the Strait of Hormuz, triggering lower oil prices. A prolonged closure however would keep Middle East oil prices elevated due to the Iran sanctions impact.
Beata Manthey and Max Layton explore the latest developments in the U.S.-Iran conflict and various scenarios as we approach year's end. As they discuss, Iran has incentives to escalate the conflict, which seems likely to get worse before it gets better.
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Beata Manthey, Head of European Equity Strategy
Beata Manthey is Head of European Equity Strategy in Citi Research. She joined Citi in 2007 as a Global Equity Strategist. Beata is part of a team that focuses on broader equity market issues. Prior to joining Citi, she worked at the European Bank for Reconstruction & Development.
Max Layton, Global Head of Commodities Research
Max Layton is Global Head of Commodities Research at Citi. Max was previously a Managing Director and Head of European Commodities Research at Goldman Sachs. He has also held positions as Deputy Head of Commodities Research at Macquarie Bank and as a commodities economist at the Reserve Bank of Australia.
