Fitch Ratings’ base-case Brent oil price assumption of $87/barrel on average in 2026 already incorporates a substantial geopolitical risk premium, including renewed flare-ups, hostilities or even a short-term hot war in the Middle East.
According to the credit ratings agency, it continues to see downside risks to the 2026 assumption. This, it said, reflects a material cushion in the price assumption, additional supply from volumes shipped during the June reopening of the Strait of Hormuz, adequate inventories, the expectation of a rapid recovery in Middle East supply once hostilities ease, and a forecast of the global market returning to oversupply from September.
The base-case price assumes Brent at $110/barrel in June and $100/barrel in July, well above the actual price of about $84/barrel in both months, with the current price at $79/barrel. Fitch noted its 4Q26 forecast of $70/barrel still includes a significant premium.
Volumes shipped through the strait during June’s temporary reopening were sufficient to cover about two additional months’ of closure. June shipments of 8.2 million barrels per day (mmbpd) extend the market’s ability to absorb Hormuz disruption to seven months, from the five months previously assumed, or until end-September. These volumes are equivalent to over 50% of the IEA’s oil reserve release, indicating the physical oil market is well supplied and balanced.
Fitch said its base-case price of $87/barrel assumed full closure of the strait until end-July, but did not rule out flare-ups. Hostilities resumed in July after the temporary reopening in June. While some agreement to fully reopen Hormuz may emerge in August, sporadic but likely brief flare-ups that disrupt transit remain likely for the rest of the year.
The ratings agency said it continues to expect a rapid recovery in supply once Hormuz reopens, as in June. Prices are already falling sharply. Before the recent re-escalation, Middle Eastern oil production had been recovering quickly, with Saudi Arabia back above 70% of pre-war production levels, the U.A.E. at 100% and OPEC+ above 80%. Hormuz oil flows averaged 75% of pre-war levels at end-June. Brent fell to $71/barrel by early July.
Reopening Hormuz is key to restoring oil supply, stressed Fitch. In the Red Sea, the main impact is on Saudi exports. However, Saudi Arabia can redirect flows via the Suez Canal and the SUMED pipeline to avoid the Bab el-Mandeb Strait, threatened by the Houthis. Flows through these two routes are broadly comparable, at about 5 mmbpd, in line with the assumed volume for Saudi exports through the East-West pipeline bypassing Hormuz.
Fitch said it continues to forecast a return to global oversupply from September due to a quick recovery in Middle Eastern production and exports, OPEC’s shifting focus to a volume-driven strategy and strong non-OPEC supply, with Brent dropping to $70/barrel in 4Q26.
Global observed oil inventories were high at 8.2 billion barrels in early 2026. They declined in line with the announced reserve release of 400 million barrels but are now consistent with 2021-2024 norms. Following the full reserve release, stocks will remain comfortable at about 7.8 billion barrels, equivalent to about 75 days of global consumption. IEA member countries have released 276 million barrels so far. Global observed stocks increased by 21 million barrels to 7.9 billion barrels in June. However, Chinese stocks fell by 41 million barrels in June from May, following increases in March-May.
The ratings agency said demand destruction matched its expectations at about 5 mmbpd in 2Q26 and helped balance the market when the Hormuz closure effectively removed 15 mmbpd of crude. It said that, as per expectations, demand destruction was concentrated in Asia and petrochemicals, with petrochemical feedstocks accounting for almost half of the decline and Asia for nearly two thirds. China recorded a 1.5 mmbpd drop in 2Q26; the largest globally.