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India, oil importers to negotiate transit corridors with Iran: Moody’s
In a global report on geopolitical risks, Moody's said that a return to pre-war traffic volumes is unlikely in 2026.
The Indian government has not officially commented on such an agreement even as the Centre has pushed for nationwide fuel conservation efforts, according to moneycontrol.com.
According to the report, there is little prospect of a swift and durable settlement the US and Iran and with it the full reopening of the Strait of Hormuz.
Moody's said the transit flows will gradually improve, but through bilateral channels rather than a general reopening. 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, according to PTI.
"We expect oil importers -- particularly China, India, Japan and 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... A return to pre-conflict traffic volumes in 2026 is unlikely," it said.
Moody's said even if safe passage in the Strait were to resume in the next six months, the oil market would remain supply-constrained, with persistently higher and more volatile energy prices and broader knock-on effects through costs, demand and financing conditions for exposed borrowers.
"We now expect Brent crude in the $90-110/bbl range for much of this year, with significant volatility, including occasional fluctuations outside this range in response to new developments," Moody's said.
At sustained Brent prices of $90-110/bbl, Moody's estimates real GDP growth reductions of 0.2-0.8 percentage point for several major economies.
"India is among the most exposed, given around 46 percent of its crude oil imports come from the Middle East, its sensitivity to currency depreciation and pressure on its current account and fiscal management," Moody's said.
The Middle East conflict, which started with the US and Israel joint air strikes on Iran has entered its third month. The attack triggered the closure of the Strait of Hormuz, a key chokepoint through which roughly one-fifth of the world's seaborne crude oil and liquefied natural gas (LNG) passed in peacetime.
Maritime traffic through the Strait has fallen by more than 90 percent from pre-conflict levels, with shipping activity curbed by risk aversion, high insurance costs and the presence of sea mines. Brent crude has fluctuated widely between $90 and 4120/bbl.
The disruption to shipping through the strait has become a structural supply constraint to global energy flows rather than a temporary supply shock, Moody's said, adding that it expects the disruptions to continue through autumn.
Moody's also warned that persistently higher energy prices and scarcity of energy products will feed into headline and core inflation.
"This will complicate the path for monetary policy across major economies, raise production costs across energy-intensive sectors, erode household purchasing power and tighten financing conditions for exposed borrowers," it said.