India and other oil importing nations are likely to negotiate bilaterally to secure energy supplies, potentially through coordinated transit corridors, but a return to pre-war traffic volumes is unlikely in 2026, Moody's Ratings has said.
In a global report on geopolitical risks, Moody's said there is little prospect of a swift and durable settlement between 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.
"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.
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"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 in its May 12 report.
At sustained Brent prices of $90-110/bbl, Moody's estimates real GDP growth reductions of 0.2-0.8 % for several major economies.
"India is among the most exposed, given around 46% 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.
Moody's in its May Global Macro outlook slashed India's GDP growth estimate for 2026 calendar year by 0.8 percentage points to 6%.
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% 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 $120/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.
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"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.
Moody's expects inflation in India to average 4.5% in 2026, up 1 percentage point from its earlier estimate.
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