Citigroup has cautioned that while the immediate threat of oil price shocks to the global economy is diminishing, a new set of risks may be emerging on the horizon.
The bank’s assessment comes as markets digest signs of de-escalation in the Middle East, shifting the focus from supply-side energy shocks to broader macroeconomic vulnerabilities.
The shift in risk profile follows reports that US and Iranian officials are nearing a one-page agreement to end the two-month-old conflict involving the United States and Israel.
This diplomatic progress has helped ease concerns over the security of the Strait of Hormuz, a critical chokepoint for global oil shipments.
As a result, the premium for geopolitical risk in energy markets has begun to compress, offering relief to traders who had been pricing in severe supply disruptions.
However, the reduction in oil-related stress does not eliminate all headwinds.