Fitch Ratings is sharply boosting its oil price assumptions for 2026, citing the ongoing disruption to shipping through the Strait of Hormuz.
On Friday, the rating agency raised its average annual price assumptions for Brent crude to US$87 per barrel this year from US$70/bbl. It also hiked the assumption for West Texas Intermediate (WTI) crude to US$80 per barrel from US$65/bbl, citing the longer-than-expected closure of the critical shipping lane as the reason for the revisions.
“The key driver of the oil price change is our revised assumption on the duration of the effective closure of Hormuz,” it said in a note detailing the revisions.
Fitch had previously expected the closure to last one or two months, but it’s now revised that estimate to five months — indicating that it expects the strait’s reopening to occur in July.
“Reopening could happen relatively quickly, but the process could also be fractious and uncertain,” it said.
If the reopening does happen faster than Fitch now expects, average annual prices will likely come in lower than the newly-revised assumptions, it noted.
“We continue to assume a quick recovery in production following the strait’s reopening, as there has been no material damage to oil infrastructure. Oil stored on tankers is likely to be sold first, followed by the return of curtailed production,”‘ the rating agency said.
“We expect production to ramp up to broadly normalized levels within several weeks, reflecting the region’s geology and producers’ ability to manage output under OPEC quotas.”
Fitch said market oversupply will likely act to reduce prices too.
“We expect Brent to stay at US$100-110/barrel in May-July during the Hormuz closure, before falling to US$70/barrel by September, a level driven by supply and demand, albeit with a residual premium,” it said.
Its assumptions for 2027 were also bumped higher, with Brent crude edging up to US$65/bbl in 2027, up from the previous call of US$63/bbl; and WTI crude was raised to US$60/bbl from US$58/bbl.
Beyond that, its longer-term assumptions remain unchanged.