As Middle East tensions continue to disrupt energy markets, the timeline for the reopening of the Strait of Hormuz has become a pivotal factor influencing oil prices, inflation, and precious metal trends.
In its latest commodities outlook, Citi stated that its base-case scenario anticipates the Strait of Hormuz resuming transit in the fourth quarter of 2026. Should the strait reopen, a decline in oil prices could benefit gold through channels such as inflation, interest rates, and the US dollar: lower energy costs would ease inflationary pressures, providing room for the Federal Reserve to pivot further toward easing, while also pushing the dollar and real interest rates down, thereby reducing the opportunity cost of holding gold.
Meanwhile, softer oil prices could also alleviate fiscal and external balance pressures in emerging markets, unlocking previously suppressed physical gold demand. If gold prices continue to climb and build stronger price momentum, retail investors may re-enter the market, further reinforcing the bullion rally.
The bank maintains its bullish stance on precious metals, setting a 0–3 month gold target of $4,800 per ounce and a 6–12 month target of $5,000 per ounce, both above the current spot price of approximately $4,500 per ounce.
Hormuz Reopening Could Trigger Rapid Oil Price Decline
Energy markets remain in an unusual state. Citi has raised its Brent crude forecast for the third quarter of 2026 to $86 per barrel, while keeping its fourth-quarter estimate at $70 per barrel and the 2027 forecast at $65 per barrel. Currently, the global composite oil product price has surpassed $120 per barrel, but crude itself has not yet reached 2022 highs, with the anomaly primarily reflected in sharply elevated refining margins.
Citi believes this situation is unlikely to persist over the long term. Iran faces pressure from currency depreciation and declining oil revenues, giving it an incentive to break the blockade; at the same time, high oil prices are increasing pressure on the US economy and financial markets, and the approach of the November midterm elections could further motivate the US government to push for de-escalation.
The report estimates a 20%–25% probability that the Strait of Hormuz remains closed for an extended period; if the blockade continues, Brent crude could rise to $110–$120 per barrel. The extreme scenario of escalation into mutual destruction of energy infrastructure carries only a 5%–10% probability. If the strait reopens, global oil markets could quickly shift into oversupply, with the surplus estimated at 3–4 million barrels per day.
Gold Still Biased to Upside, Pullbacks May Offer Buying Opportunities
In Citi's view, the impact of the strait's reopening extends beyond oil prices. Lower energy costs could reduce the squeeze that high oil prices place on economic growth and debt burdens, while improving the overall market environment.
The report notes that August's gold rally remains insufficiently robust, driven primarily by speculative, paper-based trading, with physical demand not fully following through. Therefore, if gold prices experience a short-term pullback, Citi views it as a buying opportunity. Should the subsequent rally generate stronger price momentum, retail capital could also re-enter, further strengthening the upward trend.
Even if the Strait of Hormuz remains closed for an extended period, Citi still sees gold as highly resilient, with overall risks tilted to the upside. However, if equities undergo a sharp correction, investors may sell gold to cover losses in other assets, potentially exposing the metal to periodic drawdown pressure.
On the technical front, gold's 100-day moving average stands at approximately $4,366 per ounce, the 50-day moving average is around $4,218 per ounce, and the $4,000 per ounce level represents a key support zone.
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