Citigroup: The US-Iran situation still faces short-term escalation risks, and Brent crude oil may drop below $70 by 2027.

Citi noted that the Democrats' landslide victory in the U.S. midterm elections could advance U.S.-Iran diplomatic negotiations. However, before the Democratic-controlled Congress is officially sworn in on January 3 next year, the White House remains in a "lame duck" period with relatively loose political constraints, exposing the short-term situation to risks of fluctuations and even renewed escalation, with oil prices likely to stay volatile over the next two months. The bank projects that in the baseline scenario (60% probability), U.S.-Iran tensions and the Russia-Ukraine conflict will gradually de-escalate, with Brent crude prices expected to fall below $70 per barrel in 2027. If conflicts escalate again (30% probability), Brent prices could rise to $120 per barrel next year. In the medium term, a Democratic-controlled Congress will increase checks and balances on the Trump administration's foreign policy, pushing for conflict resolution via negotiations. Additionally, Citi believes the Democrats' win will improve the outlook for tax incentives for renewable energy and electric vehicles. However, political headwinds facing AI data centers in Texas, Georgia, Ohio and other regions may further curb local power and natural gas demand growth expectations.