RIYADH: The effective closure of the Strait of Hormuz due to the Israel-Iran conflict is likely to be temporary, with only a limited possibility of the current development drastically impacting oil prices, according to Fitch Ratings.
Angelina Valavina, head of natural resources and commodities at Fitch Ratings for the Europe, Middle East and Africa region, said that the global oil market oversupply is expected to limit price rises, and could mitigate any potential disruptions to Iranian oversupply.
The Strait of Hormuz is a critical maritime path, handling around 20 percent of global oil trade, with approximately 20 million barrels of oil passing through daily.
“The strait is not formally closed, but vessels are increasingly avoiding it given the risk of attack by Iran or its proxies. Oil majors have halted shipments for safety reasons, and insurers are canceling war risk cover for vessels,” said Valavina.
She added: “However, we expect this effective closure of the strait to be temporary. It is a vital artery for seaborne oil transportation, with limited alternative routes.”
According to the Fitch official, the global oil market is oversupplied, which could limit the geopolitical risk premium and cap risks to price increases.
International supply growth exceeded demand growth in 2025 and Fitch expects this trend to continue in 2026.
Valavina said that supply increased by about 3 million barrels per day in 2025, while demand grew by 1 million bpd.
“We forecast supply growth of 2.4 million bpd in 2026, with demand growth of about 0.8 million bpd. Half of 2025-2026 supply increases come from unaffected non-OPEC+ producers. OPEC+ spare production capacity is 4.3 million bpd,” added Valavina.
According to Valavina, Saudi Arabia and the UAE have some infrastructure to bypass the Strait, which may mitigate transit disruptions.
Saudi Aramco operates the 5 million bpd East-West crude oil pipeline to an export port on the Red Sea, while the UAE has a 1.5 million bpd pipeline linking its oil fields to the Fujairah export terminal on the Gulf of Oman with a maximum achieved flow of 1.8 million bpd.
On March 3, JP Morgan said that the ongoing war between Israel and Iran could potentially result in oil supply losses of 3.3 million barrels per day by the eighth day of the conflict.
The report added that losses could escalate to 3.8 million bpd around day 15 and 4.7 million bpd by day 18.
