## 📈 Oil Prices Stabilize Despite Strait of Hormuz Risks

Fitch Ratings suggests the effective closure of the Strait of Hormuz following the Iran conflict is likely temporary, mitigating long-term impacts on energy costs and the global economy. • Market Impact & Pricing • Brent oil price forecast remains at US$ 63/bbl for 2026. • Global supply growth (2.4 MMbpd) continues to outpace demand (0.8 MMbpd). • Global inventories reached 8.2 Bn barrels at end-2025, enough to cover a 400-day halt in Strait shipments. • Supply Chain & Logistics • The Strait handles 20 MMbpd, representing 25% of global seaborne oil trade. • Key alternative routes include Saudi Arabia's 5 MMbpd East-West pipeline and UAE’s 1.5 MMbpd bypass to Fujairah. • Major importers China and India receive 50% of the volumes transiting the Strait. • Key Risks for Sri Lanka • While oversupply limits price hikes, any protracted blockage or infrastructure damage would trigger volatility. • As a net oil importer, Sri Lanka remains sensitive to "geopolitical risk premiums" affecting transportation and power generation costs. • Sector Outlook • Stability in global oil prices is a positive signal for Sri Lanka’s manufacturing and logistics sectors, potentially easing inflationary pressure on fuel-dependent industries.