A deal between the US and Iran to extend the ceasefire and open the Strait of Hormuz in June would see the strait start to open slightly earlier than Fitch Ratings had anticipated. The ratings agency said it still sees a high risk that the strait will not be opened immediately or that the situation remains unstable, but noted that even a temporary opening of Hormuz would significantly reduce the more extreme credit risks that the conflict has posed.
Fitch also highlighted that it remains possible that the deal, reportedly due to be signed on 19 June, is not signed or implemented. There will now be heightened pressure on both sides to conclude it, but political opposition in both the US and Iran may increase as details of the planned agreement become clearer. It is unclear what expectations there will be around Israel, but these could become an obstacle to signing if the Israeli authorities are unwilling to adhere to any commitments in the deal that involve them.
Medium-term prospects for the Gulf remain uncertain, even assuming that the agreement is signed. The pre-conflict geopolitical equilibrium was already unstable and the war is likely to lead to a period of raised regional security risk. It is not yet clear what the longer-term effects on business environments and demographic trends in countries affected by the war will be. There is also potential for further political instability in Iran post-war, which would have significant spillovers for regional credit conditions.
Fitch believes Iran’s nuclear programme and capabilities will remain a source of tension in its relations with the US and Israel. Further US or Israeli military actions against Iran remain quite likely, although it added that it is less clear whether these would lead to the sort of escalated regional conflict, including the closure of Hormuz, that we have seen in recent months.
The domestic political risks associated with further US action could ease once the mid-term elections in November 2026 are past, particularly if new pipelines lead to a perception that Iran’s capacity to disrupt hydrocarbon exports from the region has been reduced or if the US government thinks Iran has not lived up to its commitments in the prospective deal.
The ratings agency expects the global oil market to return to oversupply in about a month if the strait is fully opened as a result of the deal, as regional production ramps back up to roughly normal levels within several weeks and maritime traffic through the strait normalises. There appears to have been no material damage to regional oil infrastructure from the conflict. And therefore believes a rapid recovery of Middle East production and strong non-OPEC supply growth, as well as potential OPEC output increases up to maximum production capacity, will put downward pressure on oil prices, despite a residual geopolitical risk premium.
This supports Fitch’s view that oil prices will fall in 2H26, with Brent crude averaging USD70 a barrel in 4Q26 and USD87/bbl over 2026. With earlier Hormuz reopening, risks to its USD87/bbl projection for 2026 skew to the downside. Global oil inventories have been drawn down sharply in recent months, but the oil market entered the war with a very high level of inventories and believes restocking can be gradual.
Even a temporary opening of the strait would allow restocking of hydrocarbons and other products produced in the region that are important for global supply chains. This would push back the date at which inventories could fall to levels sufficient to cause severe stress to the global economy, reducing the most extreme credit risk scenarios associated with the conflict.
