Oil and Gas Prices Unlikely to Return to Pre-War Levels for Months
The Impact of the US-Iran Peace Deal on Oil Prices
After more than 100 days of the greatest recorded disruption to the world’s energy supplies, the global oil and gas markets have breathed a sigh of relief. Hours after Donald Trump confirmed that a US-Iran peace deal would lead to the reopening of the strait of Hormuz for tankers carrying millions of barrels of oil and gas, the price of Brent crude tumbled to lows of $82 a barrel. Wholesale gas prices fell about 6%.
The Event Details
The international oil benchmark remains well above the $69 a barrel average recorded last year but the slump from $126 a barrel at the peak of the crisis could mean that the global economy avoids the worst-case consequences predicted in the early days of the US war on Iran. The 11th-hour deal has emerged weeks before the oil market was forecast to enter a “red zone” in which soaring summer demand during the travel season was expected to collide with fast-depleting crude stockpiles.
The Data Analysis
- Brent crude price: $82 a barrel (down from $126 a barrel)
- Wholesale gas prices: fell about 6%
- Average oil price last year: $69 a barrel
The Impact Analysis
But even as the market exhales after weeks of unprecedented disruption, uncertainty remains: a return to pre-crisis normality is months away and relies on the cooperation of the Iranian regime with the White House. In the US, where Trump faces midterm elections later this year, soaring road fuel prices through the summer driving season represented a real political risk to the Trump administration.
The Prediction
Market observers believe it could be late July before minesweepers can assure mainstream shipping companies, and their insurers, that the trade route that once carried a fifth of the world’s oil and gas is clear to play a role in the Gulf’s long journey back to pre-crisis exports. Despite the sharp fall in global oil and gas markets in response, prices may now remain between $80 and $90 a barrel over the rest of the year as buyers race to refill the heavily depleted emergency crude stockpiles.