Strait of Hormuz closure to put limited impact on oil prices: Fitch report

The USD 63/bbl estimation for average Brent crude price for 2026 is not going to see any significant rises, as the Strait of Hormuz closure would be only temporary and global oil market oversupply should prevent spikes in oil prices, according to the Fitch Ratings report.

The strait is not formally closed but vessels are increasingly avoiding it given the risk of attack by Iran or its proxies, however, oil majors have halted shipments for safety reasons, the report said.

"We do not expect significant upside to our December 2025 assumption of an average Brent oil price of USD63/bbl for 2026. However, we expect this effective closure of the strait to be temporary," as per the Fitch report.

Prior to the conflict, around 20 million barrels per day (MMbpd) of crude oil and petroleum products transited the strait, accounting for about a quarter of global seaborne oil trade and a fifth of global oil consumption, it said.

The report highlights that about half of the oil volumes transported through the strait are exports from Saudi Arabia and the UAE, with the remainder from Iraq, Kuwait and Iran. About half of these exports go to China and India. A protracted closure would affect both exporting and importing countries and therefore is not our baseline assumption.

In addition, the global oil market is oversupplied, which should limit the geopolitical risk premium and cap risks to oil price increases, it further said. Global supply growth exceeded demand growth in 2025.

Fitch expects this trend to continue in 2026.

Supply increased by about 3MMbpd in 2025, while demand grew by well below 1MMbpd. We forecast supply growth of 2.4MMbpd in 2026, with demand growth of about 0.8MMbpd.

"The duration and intensity of the increasingly regional conflict remain uncertain. Any protracted blockage of the strait or material and sustained damage to the region’s oil and gas production and transportation infrastructure would materially affect oil markets and likely result in a more material rise in our base case 2026 oil price assumption," the report added.