Oil Market Will Return to Oversupply Once Hormuz Reopens: Fitch Ratings

The Hormuz strait closure created a logistical supply shock but does not alter the direction of the market, Fitch Ratings says in a new report. A rapid production recovery in the region, strong non-OPEC growth and potentially more aggressive OPEC policy are likely to re-establish oversupply in 4Q26 and drive prices lower once the strait reopens.

Our base case Brent oil price of USD87 a barrel (bbl) on average for 2026 reflects our assumption that the Strait of Hormuz will reopen around the end of July, implying an effective five-month closure. The uncertainty remains high regarding the timing of Hormuz reopening and the risk to oil price is binary.

The current price spike reflects a temporary logistical supply shock rather than a lasting loss of production capacity. We assume the strait will reopen around the end of July and expect Brent to fall sharply from the high March-July levels.

We project the market to return to oversupply from September 2026 due to a lack of material damage to the regional oil infrastructure, rapid recovery in Middle East production, strong non-OPEC supply growth and potential OPEC output increases beyond pre-conflict quotas.

We forecast global oil supply to be about 2.9 mmbpd 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. We assume global supply to exceed demand in 2026 on average for the year.