Oil market to remain supply constrained even if passage through Hormuz resume in next six months: Moody’s

“Oil market supply tight through 2026 despite Hormuz reopening: Moody’s Oil market may remain supply-constrained with persistently higher and volatile energy prices, leading to broader “knock-on” effects, even if safe passage through the Hormuz Strait were to resume in the next six months, according to Moody’s, an international credit rating agency. Cautioning that the knock-on effects are expected through costs, demand and financing conditions for exposed borrowers; Moody’s said “these lasting supply constraints, combined with embedded geopolitical risks, will result in persistently higher energy prices, with Brent crude averaging $90-$110 a barrel (bbl) through much of the year.” Persistently higher energy prices will lead to increases in inflation and production costs, limiting household purchasing power, complicating the path for monetary policy across major economies and tightening financing conditions, it said in a report. Highlighting that it now sees a single, central scenario which assumes a prolonged and significant disruption to the Strait of Hormuz through autumn; Moody’s said under this scenario, it continues to assume no major damage to key production facilities or infrastructure, but expects sustained disruption to shipping, including energy supplies and related products, through autumn of 2026. “Transit flows should gradually improve from current levels as oil importers bilaterally negotiates passage, though a return to pre-conflict traffic volumes is unlikely,” it said. Even where mitigating factors emerge - such as an early negotiated settlement, faster-than-expected improvement in transit flows, or higher non-Opec supply - any improvement in credit conditions will be gradual, with normalisation still taking several months, it said, expecting geopolitical uncertainty to persist through much of the year, alongside ongoing vulnerabilities in energy markets and supply chains. Expecting transit flows to gradually improve, but through bilateral channels rather than a general reopening; it said oil importers — particularly China, India, Japan and Republic of Korea — to negotiate passage bilaterally with Iran, potentially through coordinated transit corridors such as those reportedly emerging near Larak Island and through Omani territorial waters. “This would allow some incremental improvement in energy transit flows from near zero now, but the process will be slow, opaque and subject to interruption. A return to pre-conflict traffic volumes in 2026 is unlikely,” it added. Finding that core energy infrastructure in the Gulf Co-operation Council (GCC) region has not suffered lasting damage, it said the supply shock is driven by the disruption to transit, not the destruction of productive capacity. Highlighting that the Strait disruption is no longer a short-lived supply interruption buffered by inventories but is now a structural supply constraint drawing down global stocks, constraining refinery throughput and keeping crude and refined product prices persistently high; Moody’s said the effects extend beyond crude. “Qatar supplies around 20% of worldwide LNG (liquefied natural gas) trade, almost all of which transits the Strait. Prolonged disruption will keep prices high for natural gas, particularly in Europe and Asia, and also for fertilisers, aluminium and other industrial inputs, with knock-on effects on food prices,” it said.

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