Oil prices have already collapsed 30% in the last three months. Now one of Wall Street’s biggest banks says the selloff is far from over. The reason is not more war – it is peace.
The Citi Forecast: Oil Headed to $60
By the turn of the year, they expect it to stay in a range of $60 to $65.
That would be a steep drop from the current price. The last time it was below $60 was in January.
The analysts said the main driver of this decline is the fading impact of the Strait of Hormuz blockades. That narrow waterway, where a huge share of the world’s oil passes, was disrupted when the US-Iran war began in late February 2026. But a memorandum of understanding, or MOU – a preliminary agreement – between the two countries to pause hostilities has allowed normal shipping traffic to resume.
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“Fundamentals are rapidly reasserting themselves,” the Citi analysts said. In plain terms, the temporary war-driven price spike is evaporating as supply flows back.
Other Banks See the Same Glut
Citigroup is not alone. Goldman Sachs Group Inc. also said the global oil market is heading back to oversupply now that the Iran war impact is fading. Morgan Stanley has cut its oil price forecasts twice recently, citing the risk of a glut – too much oil and not enough demand.
During the war, fear of blocked oil tankers inflated prices. Now that the MOU is in place, that air is rushing out.
Citi analysts expect the MOU to hold and eventually turn into a permanent deal over the coming months. They wrote, “We expect the MOU to hold and turn into a deal over the coming months as incentives to de-escalate outweigh the alternative for the US, Iran, and much of the ME region.” Both sides, they argue, have stronger reasons to reduce tensions than to keep fighting.
What to Do Now: Sell the Rallies
Citi’s advice to investors is blunt. That means if oil prices bounce up this summer, they see it as a temporary blip – not a trend change. The oversupply, they believe, will keep pushing prices down.
What to Watch
The key factor is whether the MOU turns into a final deal. If talks stall or break down, oil could spike again. But the big banks are betting on a lasting peace. For now, the trend is clear: lower oil prices ahead.
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