Citibank expects the U.S. to take limited action against Iran to avoid escalation.

In its report, Citibank stated that it expects the United States and Israel to take limited actions against Iran in the near future to avoid escalation and push Iran to reach an agreement on its nuclear program. The bank said that these small steps may include limited military actions by the US and the detention of oil tankers, which are expected to continue to raise the risk premium in the oil market, especially due to concerns about Iran closing the key transit point of the Strait of Hormuz. Oil prices rose 3% to a five-month high on Thursday, as fears of a potential global supply disruption from a US attack on Iran, one of OPEC's largest oil-producing countries, continued to escalate. Citibank gave a 70% probability to its scenario of limited actions, stating that it "reflects the sensitivity of the US to rising energy prices" and that, for domestic political considerations, "President Trump tends to avoid war, and ongoing pressure on Iran could bring about change and lead to an agreement." Citibank expects Iran not to make a large-scale response, "as Iran itself does not want a war." In its base case scenario, Citibank predicts that the US and Iran will reach an agreement and ease tensions at some point in 2026, which will lower the geopolitical risk premium related to Iran, currently at $7-10 per barrel. On Thursday, Brent futures closed at $70.71 per barrel.