Is it a stretch to say that "1: perform this list of multiplications and additions. 2: GOTO 1" cannot be called a FHE system?
A UTM is an unbounded tape T of encrypted bits, an encrypted state S, a circuit U(S, B) = (S', B', V') representing the state machine of the TM with V' as an output to control the next step, and the circuit for D_O(X). After each evaluation of U the state S is replaced by S', the bit at the current position on the tape is replaced with B', and if V = D_O(V') is 0, move the position on the tape left, if it's 1 move right, and if it's 2 then halt.
A bounded-length Turing Machine can be represented as a finite state machine (with the computing power of a standard physical computer) without leaking any information about changes to the tape by (T', S', V') = FSM(T, S) where the entire tape T is replaced by the output of the circuit at each step and D_O(V') is 1 for continue or 0 for halt.
I don't like the name "termination oracle", it sound too much like "halting oracle" which is not what is going on here. All we do is add an outer while-loop, a simple algorithmic transformation. I wouldn't even consider that an oracle.