Fitch Ratings has warned that its $87-per-barrel average Brent crude forecast for 2026 faces growing downside risks. The agency said its forecast already includes a significant geopolitical premium for renewed Middle East hostilities.
Fitch identified several factors that could push oil prices lower. These include additional supplies shipped during the temporary reopening of the Strait of Hormuz, comfortable global inventories and a potential rapid recovery in Middle East production.
**Oil Market Faces Growing Supply Cushion**
Fitch had expected Brent to average $110 per barrel in June and $100 in July. However, actual prices averaged about $84 during both months. Brent currently stands near $79 per barrel, while Fitch’s fourth-quarter forecast remains $70.
Moreover, the temporary reopening of the Strait of Hormuz in June proved more significant than initially expected. Shipments through the waterway reached 8.2 million barrels per day, extending the market’s ability to absorb a disruption from five months to seven months.
The agency said the additional supply represented more than half of the International Energy Agency’s oil reserve release. Therefore, the physical oil market remains relatively well supplied.
**Hormuz Reopening Could Pressure Prices**
Fitch expects some agreement to fully reopen the Strait of Hormuz in August. However, it also anticipates sporadic and brief disruptions through the remainder of 2026.
Furthermore, the agency expects Middle Eastern oil production to recover quickly once hostilities ease. Saudi Arabia had restored output to more than 70% of pre-war levels, while the UAE had returned to full production.
Meanwhile, oil flows through Hormuz reached 75% of pre-war levels by late June. Consequently, Brent prices fell to around $71 per barrel by early July.
Fitch also noted that Red Sea disruptions mainly threaten Saudi exports. However, Saudi Arabia can reroute shipments through the Suez Canal and SUMED pipeline, reducing reliance on the Bab el-Mandeb Strait.
