According to Fitch Ratings in London, the likelihood of extreme stress scenarios within global energy markets has diminished following the announcement of a two-week ceasefire in the Gulf region and renewed high-level discussions between the US and Iran. However, the ceasefire is facing significant pressure, leading to heightened uncertainty regarding future developments.
Several key factors remain uncertain, including the results of the ongoing negotiations, the security and business landscape post-conflict, and the rate at which energy supplies and logistics can recover. Fitch’s adverse scenario continues to serve as a relevant measure for assessing potential downgrades.
Should the ceasefire prove effective and sustainable, it would alleviate immediate escalation threats, such as a large-scale ground invasion of Iran, disruptions to shipping in the Red Sea—especially critical if the Strait of Hormuz remains closed—or military actions against Iran by nations within the Gulf Cooperation Council.
On the other hand, a significant escalation of the conflict could lead to considerable damage to energy production in Iran and other Gulf nations. Such a scenario could trigger substantial and prolonged increases in global oil and gas prices, potentially pushing Brent crude prices above the projected averages of approximately USD 130 per barrel in the second quarter of 2026 and USD 100 per barrel for the entire year, as outlined in Fitch’s adverse scenario. However, these price increases may be limited by the likelihood of significant demand decline at such elevated price levels.
Fitch maintains that the average base case for the Global Economic Outlook in March 2026, which anticipates Brent prices around USD 70 per barrel, aligns with a gradual normalization of oil supply in the latter part of the second quarter of 2026 and beyond, contingent upon the reopening of the Strait of Hormuz after the ceasefire. Currently, the physical market appears adequately supplied, and oil prices could revert to pre-conflict levels more rapidly than many in the market expect, despite disruptions and damages caused by the conflict.
Nonetheless, considerable risks to this base case persist, with a tendency toward higher energy prices and further disruptions. While the ongoing negotiations between the US and Iran may offer more clarity on some of these issues, the primary risk is that elevated geopolitical risk premiums could sustain high oil prices for an extended period.
The situation in the Gulf remains precarious. The ceasefire is tenuous, and negotiations are expected to be highly complex. Consequently, scenarios of escalation remain feasible. Even if the ceasefire holds, the conflict could have lasting ramifications on the security and business environments in the Gulf, which are difficult to predict at this time. These potential effects could impact the credit ratings of various entities operating in the region.
