The prognosis is most favorable when the instrument fragment is located in the apical third completely obstructing the canal because this fragment effectively acts as a natural barrier, preventing the passage of bacteria and irritants into the periapical tissues. This containment allows the periapical healing to proceed despite the fragment. Additionally, attempts to remove or bypass a fragment in this region carry a higher risk of procedural errors, so conservative management with proper cleaning and obturation coronal to the obstruction often leads to a successful outcome. Thus, the apical location with obstruction provides a controlled environment favoring prognosis.

Reference: Cohen's Pathways of the Pulp, 12th Edition.