New Delhi: The surge in crude oil prices triggered by the closure of the Strait of Hormuz is set to prove short-lived, with the market likely to swing back into oversupply and prices falling once the waterway reopens, Fitch Ratings has said in a new report. The agency described the closure as a logistical disruption that has not changed the underlying direction of the market.
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"The Hormuz strait closure created a logistical supply shock but does not alter the direction of the market," Fitch said. It expects a rapid production recovery in the region, strong non-OPEC supply growth and potentially more aggressive OPEC policy to re-establish oversupply in the fourth quarter of 2026 and pull prices lower after the strait reopens.
Fitch's base case is for Brent crude to average USD 87 a barrel (bbl) in 2026, an assumption that rests on the Strait of Hormuz reopening around the end of July, an effective five-month closure. "We assume the strait will reopen around the end of July and expect Brent to fall sharply from the high March-July levels," the agency said.
It cautioned that the timing of any reopening is far from certain. "The uncertainty remains high regarding the timing of Hormuz reopening and the risk to oil price is binary," Fitch said.
The agency stressed that the run-up in prices stems from constrained shipping routes rather than any destruction of supply capacity. "The current price spike reflects a temporary logistical supply shock rather than a lasting loss of production capacity," it said.
Fitch projected the market to swing back to oversupply from September 2026, citing the absence of material damage to the region's oil infrastructure, a quick rebound in Middle East production, robust non-OPEC supply growth and the prospect of OPEC raising output beyond its pre-conflict quotas.
For the year as a whole, the agency estimated that the closure would still leave supply lower on average. "We forecast global oil supply to be about 2.9 mmbpd lower on average in 2026 than in 2025, based on a five-month Hormuz closure and excluding oil reserve releases," it said.
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Despite the year-average shortfall, Fitch expects the balance to flip soon after the strait reopens. "However, we expect the market to revert to surplus quite quickly after the reopening of the strait, with an oversupply of about 4 mmbpd in 4Q26 depending on OPEC policy," it said. "This will create an overhang in the market and push oil prices down."
The agency added that, taken across the full year, it assumes global supply will exceed demand in 2026.
