Written by The Banking Post
Global oil and gas markets are unlikely to return to normal quickly, even after an agreement to end the Iran conflict and reopen the Strait of Hormuz, energy experts have cautioned.
Although the deal announced on Sunday eased immediate fears of further escalation, analysts say it will take months before disrupted supply chains recover fully and energy companies can restore production and shipping at normal levels.
The Strait of Hormuz, a key route for global energy trade, typically handles about one-fifth of the world’s oil and refined fuel shipments. However, during the conflict, dozens of crude-carrying vessels were left stranded in the Persian Gulf for more than three months, unable to safely pass through the waterway.
Industry experts say restarting operations will be slow due to logistical bottlenecks, insurance challenges and lingering security risks.
“It’s going to take time for people to feel comfortable and for insurance to be in place, particularly to get people on the ground to restart some of these assets,” said Daniel Evans, global head of fuels and refining research at S&P Global Energy.
Even after the announcement, oil prices initially moved lower. Brent crude fell by $3.45 to $83.89 per barrel, while US benchmark crude dropped $4.03 to $80.85 per barrel. However, both remain well above pre-conflict levels of around $70 per barrel.
Evans said the unwinding of disruptions will be gradual, as stranded ships are cleared first before new tankers can enter the region.
“To bring a ship in, you need to be confident that you’ve got a big enough window of safety to load it and move it out,” he said.
He added that crude transport itself is slow, with shipments often taking months from loading to final delivery at refineries across the globe.
The disruption also forced some Middle Eastern producers to halt output due to storage constraints, a process known as a production “shut-in.” Restarting these operations is expected to take considerable time.
Countries with alternative export routes, such as Saudi Arabia and the United Arab Emirates, are likely to resume output faster. But others face deeper setbacks.
“But places like Iraq could be much more challenged because they’ve had a much bigger shut-in… it may well take about a year before they get back,” said Alan Gelder, senior vice president for refining, chemicals and oil markets at Wood Mackenzie.
He added that global energy investment had stalled during the conflict, further slowing recovery.
“Investment in the energy system ground to a halt, so it will take time for this capital to restart,” he said.
Experts also warn that producers will remain cautious until they are confident the ceasefire is stable and the Strait remains reliably open.
“We don’t know what ‘open’ means or how quickly trapped supply can move out,” said Daniel Sternoff, senior fellow at the Center on Global Energy Policy.
He added that oil producers are unlikely to restart output until they are assured the situation will remain stable beyond the short term.
