Even if the US and Israel continue bombing Iran and Tehran retaliates by making it much harder, if not impossible, for oil tankers to move through the Strait of Hormuz, the oil market’s response has been comparatively muted. The strait carries about 20m barrels a day of crude and petroleum products, about a quarter of global seaborne oil trade and a fifth of global oil consumption, yet Brent has not priced in a prolonged shock.

Oil prices did jump at the start of the escalation, with Brent rising to about $84 a barrel on Tuesday 3 March as strikes and counterstrikes disrupted shipping in the Gulf. By 5 March, Brent was trading between $80 and $84 a barrel as markets weighed the risks against ample supply and inventories.

That relative calm begs a question: why has a conflict centred on one of the world’s most important oil chokepoints not produced a bigger, more persistent price move? Angelina Valavina, Emea head of natural resources and commodities at Fitch Ratings, set out two broad reasons in a note dated 5 March 2026. First, she argued that the effective closure of Hormuz is likely to prove temporary because the route is economically indispensable. Second, she concluded that the global oil market is already oversupplied, leaving less room for a sustained geopolitical risk premium.

Effective closure, not formal shutdown

Valavina stressed that the strait is not formally closed, but it described an “effective closure” as vessels increasingly avoid the passage given the risk of attack by Iran or its proxies. She noted that oil majors have halted shipments for safety reasons and insurers are cancelling war risk cover for vessels.

Even so, Fitch expects this effective closure to be temporary. Valavina argued that Hormuz is a vital artery for seaborne oil transportation, with limited alternative routes, and that a protracted disruption would quickly hit both exporting and importing countries.

Before the conflict, about 20m barrels a day transited Hormuz. About half of the volumes were exports from Saudi Arabia and the United Arab Emirates, with the remainder from Iraq, Kuwait and Iran. About half of these exports go to China and India, Fitch added, an exposure that it argued makes a prolonged blockage unlikely to be sustained. 

If the strait were to remain effectively closed for a protracted period, Fitch argued that naval protection for tanker navigation could be considered, as occurred during the 1980s Iran-Iraq war.

Oversupply caps the upside

Fitch’s second argument is that the market is entering the disruption with too much supply. Global supply growth exceeded demand growth in 2025 and Valavina expects this to continue in 2026.

Supply increased by about 3m barrels a day in 2025 while demand grew by well below 1m barrels a day. Fitch forecasts supply growth of 2.4m barrels a day in 2026 with demand growth of about 0.8m barrels a day. About half of 2025-2026 supply increases come from unaffected non-Opec+ producers, while Opec+ spare production capacity is 4.3m barrels a day.

400-day inventory

Valavina also pointed to stockpiles that it said could absorb a lengthy shipping disruption. Global observed oil inventories rose by 1.3m barrels a day in 2025 to reach their highest level since March 2021.

Total global inventories stood at 8.2bn barrels at end-2025, Valavina emphasised, which she argued would be sufficient to cover a halt in oil shipments via Hormuz for over 400 days.

Moreover, Saudi Arabia and the UAE have some infrastructure to bypass Hormuz, which may mitigate transit disruptions, such as Saudi Aramco’s 5m barrels a day East-West crude oil pipeline to an export port on the Red Sea. The UAE operates a 1.5m barrels a day pipeline linking its oil fields to the Fujairah export terminal on the Gulf of Oman with a maximum achieved flow of 1.8m barrels a day.

Iran remains the swing risk

It is important to note that Iran’s weight in global supply is not large enough, by itself, to overwhelm a surplus market. Iran produces about 3.5m barrels a day and exports about 2m barrels a day, Fitch estimated, accounting for about 3.5% of global crude oil production.

Though Valavina cautioned that the duration and intensity of the increasingly regional conflict remain uncertain. Any protracted blockage of Hormuz or material and sustained damage to the region’s oil and gas production and transportation infrastructure would materially affect oil markets and could force a more material rise in its base case assumption of an average Brent oil price of $63 a barrel for 2026.

For the time being, Fitch Ratings argues the combination of oversupply, 4.3m barrels a day of Opec+ spare capacity and end-2025 inventories of 8.2bn barrels means any Iran-related disruption is likely to remain a manageable market event rather than a major oil shock.