New Delhi, March 5 The estimated average Brent crude price of USD 63/bbl for 2026 is unlikely to see a significant increase, as the closure of the Strait of Hormuz would be temporary, and the global oil market oversupply should limit price increases, Fitch Ratings said.
Fitch said that while the strait is not formally closed, vessels are increasingly avoiding it due to the risk of attack by Iran or its proxies. Major oil companies have halted shipments for safety reasons, and insurers are canceling war risk coverage for vessels.
"We do not expect a significant increase to our assumption of an average Brent oil price of USD 63/bbl for 2026," Fitch said, adding that it expects this effective closure of the strait to be temporary.
Furthermore, the global oil market oversupply should limit price increases and mitigate any potential disruptions to Iranian oil supply, it added.
Brent crude prices have already risen to USD 82-84 per barrel from an average of USD 66-67 in January-February 2026.
The US and Israel jointly launched military strikes on Iran on February 28. Iran responded by firing drones and missiles at Israeli and US military installations in the Gulf, as well as at Dubai, a global business hub.
The Strait of Hormuz is a vital artery for seaborne oil transportation, with limited alternative routes. The crisis in West Asia has led to spiraling prices of global oil and natural gas. The strait is a narrow 33-kilometer passage connecting the Persian Gulf to the Arabian Sea.
Fitch said that 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.
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 prolonged closure would affect both exporting and importing countries, and therefore is not our baseline assumption. If the strait were to remain effectively closed for a prolonged period, naval protection for tanker navigation could be considered, as occurred during the 1980s Iran–Iraq war," Fitch said.
Furthermore, the global oil market is oversupplied, which should limit geopolitical risk premiums and cap risks to oil price increases, Fitch 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, Fitch added.
While Iran is a sizeable oil producer, producing about 3.5 MMbpd and exporting about 2 MMbpd, it accounts only for about 3.5 per cent of global crude oil production.
Fitch said that any potential supply disruption would be offset by global market oversupply.
However, the duration and intensity of the increasingly regional conflict remain uncertain, Fitch said, adding that oil price volatility would increase if there were to be any material disruption to Iranian oil production.
"Any prolonged blockage of the strait or significant 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 significant rise in our base case 2026 oil price assumption," Fitch said.
