Important Links

Implications of Middle East Tensions on Oil

6 June 2017PoliticsEconomics

The new sanctions against Qatar are unlikely to disrupt the recent agreement by OPEC and its allies to extend their oil-production cuts for another 9 months into January 2018.

5 Arab States Cut Ties with Qatar

  • The governments of Saudi Arabia, Bahrain, UAE, Yemen and Egypt announced that they were severing diplomatic ties with Qatar over allegations that the latter is pursuing policies that are destabilizing the region, including support for regional jihadist groups and for Iran. Qatar denies these allegations.
  • In Citi analysts view, these developments appear more serious than the incident in 2014, when comments made by a Doha-based cleric sparked a row that resulted in a severing of diplomatic ties between March and November of that year.

This time, the sanctions against Qatar go well beyond the diplomatic, and include:

  • Closing of the land border between Saudi and Qatar;
  • Suspension of all flights between Qatar and its Gulf neighbours (Saudi, Bahrain, UAE, and Yemen);
  • Closing of these Gulf neighbours' airspace to Qatar's national carrier, Qatar Airways;
  • The expulsion of all Qatari nationals from their Gulf neighbours (effective in 14 days), and the withdrawal of their citizens from Qatar within the same time period.
  • It is not clear what is required of Qatar for these sanctions to be lifted, and it is therefore difficult to estimate how long they will remain in place. In 2014, it took eight months to resolve the row.

Implications on Oil

  • Oil prices finished lower on 5 June on concerns that rising tensions between OPEC (Organization of the Petroleum Exporting Countries) members could jeopardize the global production agreement. The West Texas Intermediate crude (WTI) fell 26 cents, or 0.6%, to settle at $47.40 a barrel. Brent crude slipped 48 cents, or 1%, to $49.47 a barrel. The settlements for both benchmark crudes were the lowest in just under a month.
  • In Citi analysts view, the new sanctions against Qatar are unlikely to disrupt the recent agreement by OPEC and its allies to extend their oil-production cuts for another 9 months into January 2018.
  • While Qatar is an OPEC member, it is not a significant crude oil producer. Qatar contributed just 2% to OPEC's April production. Citi analysts are still expecting WTI and Brent Crude to average $56 and $59 a barrel in 2017 as the impact of output cuts since January start to kick in.
  • Nevertheless, the situation remains fluid and Citi analysts are keeping a close watch on any escalating tensions. Citi analysts continue to believe that diversified portfolios can help investors navigate volatile markets.

Our recent research

A Redefinition of Value Investing

Diversification into cyclical markets, particularly value stocks with still subdued valuations, remains preferred. Citi analysts consider four strategies to identify where "value" may be for certain companies.

Find out more


Assessing the Pullback in the Technology Sector

The technology sector is seeing some pressure after a rally that has surpassed expectations. COVID-19 cyclicals were more resilient, consistent with Citi analysts’ preference of rotating from growth to value stocks amid a cyclical recovery. Looking ahead, Citi analysts believe this is more likely a correction rather than the start of a broader downturn, as the cyclical recovery remains intact. Nevertheless, further volatility is expected due to the upcoming US Presidential election and ongoing pandemic. With US equity valuations at a historic high relative to others, investors could also look to diversify into non-US markets.

Find out more


Going Cyclical in Asia

Investors in Asia have flocked to COVID-19 defensive or growth sectors like technology this year, while COVID-19 cyclical or value sectors have lagged significantly. Citi analysts expect this relative performance to reverse, at least partially, as re-opening takes place.

Find out more

EquitiesAsia PacEmerging Markets

Take the first steps to your wealth management planning with Citi

Speak to a Relationship Manager
0207 500 1992

Already with Citi? Contact your relationship manager or view product availability on Citi Online

Why choose Citi

A relationship - not just a bank account

A dedicated Relationship Manager giving you access to our internal team of product experts and all our benefits

Access to exclusive Citi products

A range of current and investment products available both on shore and offshore, in the currency of your choice
Multi-currency accounts
Investment products

Global services for a global lifestyle

Our team is here to support you getting started in UK or with International travel and relocation
Moving to and from the UK
Travelling overseas

Offshore investments

We offer a diverse range of banking and investment services, including for those who want access to offshore investments

Find out more

Just moved to the UK?

We can save you time money and hassle. If you are a foreign national in the UK, Citi's International Banking Service can help you manage your money, home and away.

Find out more

Investment products are not insured by any governmental agencies, are not bank deposits, and are neither obligations of, nor guaranteed by, Citigroup, or any of its affiliates, unless otherwise stated. Investment products are subject to investment risks, including possible loss of some or all of the principal amount invested. Past performance is not indicative of future results, investments can go down as well as up.

“Citi analysts” refers to investment professionals within Citi Research (“CR”), Citi Global Markets Inc. (“CGMI”) and voting members of the Citi Global Investment Committee. Citibank N.A. and its affiliates / subsidiaries provide no independent research or analysis in the substance or preparation of this document. The information on this page has been obtained from reports issued by CGMI. Such information is based on sources CGMI believes to be reliable. CGMI, however, does not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute CGMI’s judgment as of the date of this page and are subject to change without notice. This page is for general information purposes only and is not intended as a recommendation or an offer or solicitation for the purchase or sale of any security or currency. No part of this page may be reproduced in any manner without the written consent of Citibank N.A. Information on this page has been prepared without taking account of the objectives, financial situation, or needs of any particular investor. Any person considering an investment should consider the appropriateness of the investment having regard to their objectives, financial situation, or needs, and should seek independent advice on the suitability or otherwise of a particular investment. Citi Research (CR) is a division of Citigroup Global Markets Inc. (the "Firm"), which does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this information. Investors should consider this information as only a single factor in making their investment decision.

Opinions expressed herein may differ from the opinions expressed by other businesses or affiliates of Citigroup, Inc., and are not intended to be a forecast of future events, a guarantee of future results or investment advice, and are subject to change based on market and other conditions.