The Freedom Curtalis
Fitch Solutions estimates that the US and Iran will reach a diplomatic agreement to open the Straits of Hormuz, but this will not happen before mid to late June, while it will then take six to eight weeks to normalise the situation after the end of the conflict. Prolonged disruption will keep oil prices higher for a longer time than previously expected, with Brent fashioned this year at $90 a barrel on average. High oil prices will push global inflation to 4% with 4.5% in 2026, prompting several central banks to turn towards a stricter monetary policy, while the blow to real incomes will hit consumer spending worldwide.
How and when will the conflict end?
More specifically, Fitch Solutions BMI's core scenario, which is an independent analysis company belonging to the Fitch rating house group, is that the conflict remains in a prolonged but fragile phase of truce.
However, It now expects diplomacy to last until the end of June to reach a preliminary agreement, instead of mid-May, as previously estimated. Meanwhile, he expects the truce to be followed, although periodic resurgences are possible. Recent attacks interchanges appear to have been kept below a scaling limit and Donald Trump seems to be trying to avoid an unnecessary escalation. Small revivals do not change the house's view that the diplomatic route remains sustainable.
However, the situation remains extremely fragile and uncertain, stresses Fitch Solutions. There are three main risks to the baseline scenario, as he points out.
The first is that the possibility of a "Climaxation" scenario remains relatively high, at 45%. This could happen if talks fail at any stage, especially as Iran's harsh stance in the Straits of Hormuz and on the nuclear programme could make it difficult to secure a politically viable exit for Trump. Repeated skirmishes also increase the margin for incorrect calculations or bad communication that could cause a wider confrontation.
Second, there is a risk that the "Extension" scenario will remain in force after June. This could happen if financial and oil markets remain relatively restrained from expectations, providing the US with more time to increase economic pressure on the Iranian regime and force it into more concessions. However, a prolonged blockade of Hormuz is more likely to push Iran to escalate its attacks on Gulf States and merchant ships instead of making these concessions.
Thirdly, There is a risk that Trump will decide to leave the war unilaterally without an agreement. This would give Iran de facto control of the Straits of Hormuz on its terms, but would also leave the regime without lifting sanctions. Therefore, the Middle East would remain immersed in uncertainty, with increased geopolitical risks keeping global activity weak.
When will the Straits of Hormuz be normalized?
Even if negotiations reach an agreement that the Straits of Hormuz will remain operational "open", this will not directly amount to a return to commercial regularity, highlights the house. It expects the Straits to remain commercially limited at least until the end of June, with a limited number of passages, selectively approved and mainly through the northern lane of the Traffic Separation Plan (TSS) under direct Iranian supervision. This route is structurally limited, narrower, more shallow in sections, more functionally exposed than the central channel before the crisis. The northern route is further burdened by Iranian licensing requirements, tolls and discretion.
Even if a "opening" of the central strait is announced, effective trafficking will remain limited by persistent security risks, increased war risk premiums and unresolved natural risks, including the threat of sea mines, prompting operators to seek alternative routes through southern lanes, as attempted for a while under Project Freedom, as Fitch Solutions estimates.
On the south side, the route through the waters of Oman and the United Arab Emirates offers only an incomplete substitute for the central deep-sea TSS route. While the southern waters of Oman are seagoing and not unusually shallow, they exhibit narrower depth margins and reduced maneuver space compared to the central channel carrying most of the tumors before the crisis.
After the deescalation, the house believes it will take six to eight more weeks before flows through Hormuz approach conditions before the crisis (i.e., end of the third quarter). Normalisation will be gradual and not direct due to the need to clear minefields, verification of bottom conditions, confidence building measures, compression of insurance costs and reactivation of appetite for commercial risk.
Overall, Fitch Solutions believes that Ormuz will operate below pre-crisis levels throughout the second half of 2026.
What happens to oil prices?
Oil prices will remain higher for longer than expected before, the house points out. He has increased his annual average forecast for Brent for $2026 to $90 a barrel, nearly 20% higher than his previous forecast for $78. The prolonged disturbance in the Straits of Hormuz entails a greater cumulative loss of oil supply and there will be a delayed recovery horizon after the conflict.
What about other goods?
Continued disturbances in transport and supply present an upward risk to the price forecasts for several commodities. These factors already support aluminium prices and increase supply risks for nickel and copper producers, which are based on sulphuric acid from the Middle East for mining processes, as Fitch Solutions notes.
Similar factors threaten to disrupt fertilisers, but the world market remains relatively well equipped. The US is relatively isolated, India has already secured enough fertilizer for the current crop cycle and Brazil's aggressive supplies suggest adequate supply in view of the September plantings. As a result, at present the house does not change its forecasts for fertilizers or farm prices due to the conflict. Although upside risks accumulate due to the increasing possibility of an El Niño phenomenon since August, as he warns.
It also expects gold to remain close to its current value and its average price will be $4,600/hungry in 2026, as strong demand for safe shelters is offset by the impact of stricter monetary policy worldwide.
What does that mean for global inflation and growth?
The most important impact of a prolonged truce will be additional upward pressure on inflation, stresses Fitch Solutions. The first figures for April show the impact of rising fuel prices, with global inflation rising over 3.5% for the first time since January 2025. There were notable increases of over 3-4 percentage points in April for energy importers in the emerging economies of Asia (Philippines, Thailand and Pakistan).
Overall, he believes that global inflation will be around 0.5 percentage points higher than previously predicted, reaching an average of 4% – 4.5% this year (compared to 3.7% before the war forecast 3.1%). Fuel subsidies and stricter monetary policy will prevent global inflation from increasing over 5.0% this year.
Higher prices will erode the increase in real incomes and consumption throughout the world economy. However, Fitch expects only a moderate review of world growth by 0.1–0.2 percentage points at 2.3–2.4%. The activity will be supported by the continuing cycle of capital spending of artificial intelligence, which led to a stronger than expected increase in exports to Asia in the first quarter and a strong increase in investments in the US, as well as a positive effect of wealth on households and investors, as stock markets reached new high.
