Strait of Hormuz Closure: Oil Price Surge Risks and Economic Impact

Escalating tensions in the Middle East, following the outbreak of conflict involving Iran on February 28, 2026, have raised concerns about potential disruptions to global oil supplies. The effective closure of the Strait of Hormuz, a critical chokepoint for oil and liquefied natural gas, is driving up oil prices and creating uncertainty in energy markets. While Fitch Ratings assesses that any closure is likely to be temporary, prolonged disruptions could have significant economic consequences.

Impact on Oil Prices

The price of Brent crude oil is highly sensitive to developments in the Strait of Hormuz. According to Fitch Ratings, a three-month closure of the strait could push the average price of Brent crude to $100 per barrel for the year. A more extended six-month disruption could see prices average $120 per barrel [Sada Elbalad]. Current oil prices as of March 22, 2026, reflect these concerns:

• WTI Crude: $98.23 (+2.80%)
• Brent Crude: $112.2 (+3.26%)
• Murban Crude: $146.4 (+18.00%)
• WTI Midland: $101.2 (+2.70%)
• Opec Basket: $135.1 (+1.65%)
• Indian Basket: $156.3 (+6.76%)

Fitch Ratings anticipates that under a three-month closure scenario, Brent crude could average around $130 per barrel during the disruption, easing to approximately $90 by year-end. A six-month shutdown could lead to price fluctuations between $130 and $170 per barrel during the crisis, as well retreating toward $90 as supply conditions stabilize [Sada Elbalad].

Potential Supply Disruption

The Strait of Hormuz is a vital artery for global oil flows, with the potential to remove up to 15 million barrels per day from the market if closed [Sada Elbalad]. Despite this potential disruption, Fitch maintains a base-case forecast of $70 per barrel for 2026, expecting a spike to around $100 in March, averaging $90 in the second quarter, and declining to roughly $60 by year-end. This assumes no immediate demand destruction and sufficient global supply buffers [Sada Elbalad].

Impact on Oil and Gas Deals

The uncertainty surrounding the Strait of Hormuz has already begun to impact the oil and gas industry. Negotiations for U.S. Oil and gas deals are currently stalled or postponed as companies await clarity on market conditions and fuel prices. One legal representative specializing in fuel deals stated, “Everything is frozen… I have several deals in development, long-term contracts, but right now everything is paralyzed because no one can set a price.”

Temporary Closure Expected

Despite the current tensions, Fitch Ratings believes that the closure of the Strait of Hormuz is likely to be temporary, given its crucial role in the global economy [Fitch Ratings]. Global oil market oversupply is also expected to limit significant price increases and mitigate potential disruptions to Iranian oil supply [Zawya].

Key Takeaways

• The closure of the Strait of Hormuz is driving up oil prices, with Brent crude potentially reaching $120 per barrel if the disruption lasts six months.
• A three-month closure could see Brent average $100 per barrel for the year.
• The conflict in the Middle East has stalled oil and gas deal negotiations in the U.S.
• Fitch Ratings expects any closure to be temporary due to the strait’s economic importance and global oil market oversupply.