Citigroup: Strait of Hormuz expected to reopen in Q4, raises short-term gold price target to $4,800

As the situation in the Middle East continues to disrupt the energy market, the timing of the reopening of the Strait of Hormuz is becoming a key variable affecting oil prices, inflation, and precious metal trends.

In its latest commodities outlook, Citigroup stated that its core scenario is the reopening of the Strait of Hormuz in the fourth quarter of 2026. If the strait reopens, a decline in oil prices could benefit gold through inflation, interest rates, and the US dollar: lower energy prices would alleviate inflationary pressures, providing room for the Federal Reserve to further ease monetary policy, and pushing down the dollar and real interest rates, thereby reducing the opportunity cost of holding gold.

Meanwhile, lower oil prices may ease fiscal and external balance pressures in emerging markets, releasing previously suppressed demand for physical gold. If gold prices continue to rise and generate stronger price momentum, retail investors may re-enter the market, further reinforcing the gold rally.

The bank maintains its bullish outlook on precious metals, setting a 0-3 month target price of $4,800 per ounce for gold and a 6-12 month target price of $5,000 per ounce , both higher than the current spot price of around $4,500 per ounce.

With the reopening of the Hormuz National Park, oil prices may fall rapidly.

The energy market remains in an abnormal state . Citigroup has raised its Brent crude oil forecast for the third quarter of 2026 to $86 per barrel, but maintained its forecasts for the fourth quarter at $70 per barrel and for 2027 at $65 per barrel. While the current global average price of refined oil products has exceeded $120 per barrel, crude oil itself has not yet reached the highs of 2022. The anomaly is mainly reflected in the significant increase in refining margins.

Citigroup believes this situation is unsustainable in the long term. Iran faces pressure from currency devaluation and declining oil revenues, creating an incentive to break the blockade; meanwhile, high oil prices will increase pressure on the US economy and financial markets, and the approaching November midterm elections may further bolster the US government's motivation to de-escalate the situation.

The report estimates that the probability of the Strait of Hormuz remaining closed is about 20%-25% . If the blockade continues, Brent crude oil could rise to $110-120 per barrel. The probability of the extreme scenario where the conflict escalates to the point where both sides destroy each other's energy infrastructure is only 5%-10%. If the strait reopens, the global oil market could quickly turn into a supply glut, with the surplus expected to reach 3-4 million barrels per day.

Gold remains biased towards the upside, and pullbacks may present buying opportunities.

Citigroup believes the impact of reopening the Straits will extend beyond oil prices. Lower energy prices are expected to alleviate the pressure of high oil prices on economic growth and debt burdens, and improve the overall market environment.

The report points out that the gold price rally in August was not yet stable, mainly driven by speculation and paper trading, with physical demand not keeping pace. Therefore, Citigroup views any short-term pullback in gold prices as a buying opportunity. If the subsequent rally generates stronger price momentum, retail funds may re-enter the market, further reinforcing the upward trend.

Even with a prolonged closure of the Strait of Hormuz, Citigroup believes gold remains resilient, with overall risks skewed to the upside. However, a significant stock market correction could prompt investors to sell gold to offset losses in other assets, potentially putting downward pressure on gold prices in the short term.

From a technical perspective, the 100-day moving average for gold is around $4,366 per ounce, the 50-day moving average is around $4,218 per ounce, and $4,000 per ounce forms an important support level.

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