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Informist, Monday, Jun. 8, 2026

MUMBAI- The price of Brent crude is likely to average $87 a barrel in 2026, according to Fitch Ratings. This projection is based on the premise that the Strait of Hormuz will reopen by end of July, after a five-month closure.

"The current price spike reflects a temporary logistical supply shock rather than a lasting loss of production capacity. Assuming the strait reopens around the end of July, we expect Brent to fall sharply from the elevated March-July level," the agency said in a report.

Some commentators have expressed fear that the widespread damage that the war has caused to energy infrastructure could delay normalcy to the market once matters are settled. However, Fitch Ratings believes that there has been no material damage to the oil infrastructure so far. Moreover, historical precedent also suggests that repair timelines can be relatively short.

The global oil market is expected to balance during the assumed five-month Hormuz closure through July due to pipelines bypassing Hormuz, 400 million barrels of inventories released by the International Energy Agency, additional supply, and demand destruction, it said.

Pointing out that current market situation is different from previous such cases, the agency said the oil market entered the Iran war from a fundamentally different starting point than in past geopolitical crises. "Three structural shifts stand out: OPEC accounts for a smaller share of global supply, while the US accounts for a larger share; oil demand growth is slowing as electric vehicle (EV) penetration increases; and the market has moved into structural oversupply. These factors have helped contain the oil price shock triggered by the conflict, " it said.

The immediate market focus has been the disruption caused by the closure of the Strait of Hormuz, one of the world's most critical energy chokepoints. However, weak underlying market fundamentals are likely to drive oil prices once again after Hormuz reopens and the geopolitical shock recedes, it said.

"We forecast global oil supply to be about 2.9 mmbpd (million barrels per day) lower on average in 2026 than in 2025, based on a five-month Hormuz closure and excluding oil reserve releases. 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. This will create an overhang in the market and push oil prices down," said the agency.

Predicting a return to the normal, the agency said it expects production volumes in the West Asian region to recover quickly given the lack of material damage to oil infrastructure in the region so far. "Oil stored on tankers and in onshore storage will be sold first when Hormuz reopens, followed by the return of curtailed production. We estimate production could return to near normalised levels within several weeks, reflecting both geology and ability to flexibly manage output under the OPEC quota system." At 1538 IST, Brent crude was trading on ICE at $96.89 per barrel, up 4.14% from its previous day. End

US$1 = INR 95.70

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Abhijit Doshi

Edited by Akul Nishant Akhoury

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