Global oil markets are bracing for extreme volatility, with Brent crude prices potentially averaging $120 per barrel throughout 2026 if the Strait of Hormuz remains effectively closed for six months, Fitch Ratings has warned.
According to a newly published report by Fitch Ratings, even a shorter, three-month blockade of the critical maritime chokepoint would drive the annual average up to $100 per barrel, highlighting the severe economic threat posed by the ongoing geopolitical conflict.
Before the outbreak of the current crisis, Fitch had projected a 2026 average of $63 per barrel, a figure that reflected a largely oversupplied global market.
However, the agency’s updated base-case scenario has revised the annual average upward to $70 per barrel. This baseline projection anticipates a temporary disruption, with prices spiking to an average of $100 in March and $90 in the second quarter, before ultimately dropping to around $60 by the end of the year.
Under this specific base case, Fitch analysts assume no demand destruction will occur, citing that current global supply, heavily bolstered by the International Energy Agency’s announced release of 400 million barrels from strategic reserves, is more than sufficient to satisfy global demand.
The economic outlook shifts dramatically under the extended disruption scenarios. If the waterway remains impassable for three months, Fitch expects Brent crude to surge to $130 per barrel during the height of the closure, eventually declining to $90 by year-end to settle at a $100 annual average.
A devastating six-month blockade would trigger an even sharper market shock, pushing prices to a staggering range of $130 to $170 per barrel during the crisis and driving the annual average to $120.
To balance the market during these prolonged closures, Fitch assumes that high prices will force significant demand destruction specifically calculating a 2.5% drop in demand for a three-month closure and a 5.5% drop for a six-month blockade.
Fitch alos notes that both of these severe scenarios operate on the assumption that global powers will authorize further releases of strategic oil reserves or initiate a rapid supply response. Without such interventions, Fitch warns that the market would require even deeper demand destruction to reach an equilibrium.
Across all three modeled scenarios, the credit rating agency calculates a massive structural loss of 15 million barrels per day (MMbpd) in oil transit volumes, acknowledging that only negligible, very small volumes of crude would successfully navigate the strait during the blockade.
Fitch further emphasized that regardless of the exact timeline, oil prices are guaranteed to remain highly volatile. The persistent uncertainty surrounding the duration of the military conflict, the timeline for reopening the Strait of Hormuz, and the substantial geopolitical risk premium currently baked into the market ensure a deeply turbulent year ahead for global energy sectors.