Economy
Pre‑crisis Oil Supplies Still Months Away Even if Hormuz Reopens
AI Summary
After a US‑Iran peace deal prompted the reopening of the Strait of Hormuz, Brent crude fell to $83 a barrel and gas prices slipped 6%. Analysts warn that full restoration of pre‑crisis oil and gas flows will still take months, constrained by logistics, damaged infrastructure and political risk.
The Immediate Market Relief After Hormuz Reopening Announcement
Hours after Donald Trump confirmed a US‑Iran peace deal would reopen the Strait of Hormuz, the benchmark Brent crude price tumbled to a low of $83 a barrel, while wholesale gas prices fell about 6%. The move followed more than 100 days of the “greatest recorded disruption” to global energy supplies.
Deal Timeline and Expected Re‑opening of the Strait
- Trump announced the “great deal” would be signed on a Friday, with the strait to be reopened for “mine removal” during a 60‑day negotiation on Iran’s nuclear phase‑out.
- Analysts estimate the trade route could begin carrying a fifth of world oil and gas again by July, with full pre‑war export levels only by year‑end.
Price Movements and Stockpile Refill Costs
- Brent fell from a crisis peak of $126 a barrel to $83, still above last year’s average of $69.
- Market observers expect prices to stay in the $80‑$90 a barrel range for the rest of the year as buyers refill heavily depleted emergency crude stockpiles.
- About 80% of crude flows could resume by the end of the third quarter, according to Capital Economics chief economist Neil Shearing.
Geopolitical and Supply‑Chain Constraints Shaping the Recovery
- Even with safe passage, tankers are “in the wrong place,” and insurance costs for trans‑Hormuz voyages remain uncertain.
- Iranian drone strikes damaged Qatar’s Ras Laffan LNG complex, halting production and erasing roughly 20% of global LNG, meaning gas exports may take longer to recover.
- Restarting ageing oilfields in Iraq and Kuwait, shut after the strait closure, adds further delay to Gulf oil exports.
- Domestic political risk for the Trump administration: soaring summer fuel prices could affect the mid‑term elections.
Outlook: Gradual Return to Pre‑crisis Levels and Economic Growth Forecasts
Shearing predicts that, despite a modest price rebound, the global economy is more likely to face “weaker than previously expected growth” in Q3 rather than a recession, with GDP growth returning to a pre‑conflict pace of just over 3% by late 2026 and into 2027.