RIYADH: The effective closure of the Strait of Hormuz due to the Israel-Iran conflict is likely to be temporary, with only a limited possibility of the current development drastically impacting oil prices, according to Fitch Ratings.
Angelina Valavina, head of natural resources and commodities at Fitch Ratings for the Europe, Middle East and Africa region, said that the global oil market oversupply is expected to limit price rises, and could mitigate any potential disruptions to Iranian oversupply.
The Strait of Hormuz is a critical maritime path, handling around 20 percent of global oil trade, with approximately 20 million barrels of oil passing through daily.
“The strait is not formally closed, but vessels are increasingly avoiding it given the risk of attack by Iran or its proxies. Oil majors have halted shipments for safety reasons, and insurers are canceling war risk cover for vessels,” said Valavina.
She added: “However, we expect this effective closure of the strait to be temporary. It is a vital artery for seaborne oil transportation, with limited alternative routes.”
