BAKU, Azerbaijan, March 7. The effective
closure of the Strait of Hormuz following the outbreak of conflict
involving Iran on February 28 is likely to be temporary, Fitch
Ratings said, as the vital waterway plays a key economic role in
global oil transport, Trend reports.


Angelina Valavina, EMEA Head of Natural Resources and
Commodities at Fitch, said: "The strait is not formally closed but
vessels are increasingly avoiding it given the risk of attack by
Iran or its proxies. Oil majors have halted shipments for safety
reasons, and insurers are cancelling war risk cover for vessels.
However, we expect this effective closure of the strait to be
temporary. It is a vital artery for seaborne oil transportation,
with limited alternative routes."


Around 20 million barrels per day (MMbpd) of crude oil and
petroleum products typically transit the strait, accounting for
roughly a quarter of global seaborne oil trade and a fifth of
global oil consumption. About half of these volumes are exports
from Saudi Arabia and the UAE, with the remainder from Iraq,
Kuwait, and Iran. Approximately half of the exports go to China and
India.


Valavina added: "A protracted closure would affect both
exporting and importing countries and therefore is not our baseline
assumption. If the strait were to remain effectively closed for a
protracted period, naval protection for tanker navigation could be
considered, as occurred during the 1980s Iran–Iraq war."


Fitch also highlighted that global oil markets remain
oversupplied, which should limit price increases. Supply growth
exceeded demand in 2025, with output rising by about 3 MMbpd while
demand grew by less than 1 MMbpd. Fitch expects supply growth of
2.4 MMbpd in 2026 and demand growth of about 0.8 MMbpd, with
roughly half of new supply coming from unaffected non-OPEC+
producers. OPEC+ spare production capacity stands at 4.3 MMbpd.


Global oil inventories increased by 1.3 MMbpd in 2025 to reach
their highest level since March 2021, totaling 8.2 billion barrels,
enough to cover a halt in shipments via the Strait of Hormuz for
more than 400 days.







Saudi Arabia and the UAE have infrastructure that can partially
bypass the strait. Saudi Aramco operates the 5 MMbpd East–West
pipeline to the Red Sea, while the UAE runs a 1.5 MMbpd pipeline to
the Fujairah export terminal, with a maximum achieved flow of 1.8
MMbpd.


"While Iran is a sizeable oil producer, producing about 3.5
MMbpd and exporting about 2 MMbpd, it accounts for only about 3.5%
of global crude oil production. This means that potential supply
disruption would be offset by global market oversupply," Valavina
said.


However, she cautioned that the duration and intensity of the
regional conflict remain uncertain. "Any protracted blockage of the
strait or material and sustained damage to the region’s oil and gas
production and transportation infrastructure would materially
affect oil markets and likely result in a more material rise in our
base case 2026 oil price assumption. Oil price volatility would
rise if there were to be any material disruption to Iranian oil
production."


Fitch maintained its December 2025 assumption of an average
Brent oil price of USD 63 per barrel for 2026.