GCC: A Pivot from Volume Shock to Price Shock?

Research evidence excerpt

GCC: A Pivot from Volume Shock to Price Shock?

Revisiting the Scenario Framework (I)

Our commodities colleagues view the MoU as a material shift for oil and have revised their

forecast trajectory lower accordingly.

Brent Crude Price Paths (US$/barrel)

●In the formulation of our oil GDP forecasts for the Gulf

$/barrel

economies, we draw on the revised outlook outlined by our

commodities colleagues:

– They expect the Strait of Hormuz flows to resume

relatively quickly, recovering from around mid-July, with 100

Gulf producers lifting output in step, allowing ex-China 90

inventories to rebuild through 2H’26 rather than 80

tightening further;

70 75

– Their base case (60% probability) sees Brent at $75/bbl 60 70

in 3Q’26, $70/bbl in 4Q’26 and $65 in 2027, as 50

geopolitical risk premium unwinds and focus returns to Jun-26 Sep-26 Dec-26

soft underlying fundamentals; and Citi (new) Citi (old) Consensus

– Their bull case (20%) envisions temporary de-

US$/barrel

escalation ahead of renewed conflict, with Israel-

Lebanon dynamics the key risk and prices back above

$100, while the bear case (20%) sees a faster surplus on 105

stronger UAE, Saudi an Iranian output. 95

For non-oil activity, we focus on the share of conflict- 85

sensitive sectors in the Gulf states (wholesale, retail

trade, restaurants & hotels and transport, storage and 75

communications, in particular). Guided by our recent 65

analysis and latest data, we incorporate the conflict’s

55 potential adverse effects on non-hydrocarbon GDP into Mar-26 Jun-26 Sep-26 Dec-26

our forecasts.* Cit bull-bear range Citi base Forward

Source: Bloomberg and Citi Research *Middle East Economics: GCC: Disaggregating Non-Oil Exposure to the Conflict 8