Published on 6/17/2026
Oil prices fell immediately after the announcement of a framework to end the Iran war, but the rapid decline in trading screens does not mean that the market will return to what it was before the war, as estimates by oil companies, traders, and analysts indicate that restoring flows and rebalancing stocks, transportation, insurance, and production may take months, and may extend to a year or more if the truce remains in place.
Brent crude contracts for August fell today, Wednesday, to less than $80 per barrel, after US President Donald Trump said that the war that lasted 106 days was over, calling for the resumption of the flow of oil. However, energy and shipping companies did not deal with the political event as sufficient alone to resume normal movement across the Gulf, according to the Financial Times.
Read also
list of 2 itemsend of list
According to the US Energy Information Administration, the Strait of Hormuz accounts for about a quarter of seaborne oil trade and about a fifth of the world’s consumption of oil, petroleum products, and natural gas.
Shell CEO Wael Sawan believes that the market may need “about a year or more” before balance is restored, because the system has not only experienced an interruption in shipping, but bottlenecks have accumulated within it in storage, production, fleets, and strategic stocks, and these are elements that do not improve once the spot price of crude declines.
bottleneck
The actual return, according to the Financial Times quoting analysts, begins with the entry of empty tankers into the Gulf before the exit of the loaded tankers, because the export tanks in the region were filled during the weeks of war, and large-scale oil pumping cannot be resumed before creating a storage space that allows the crude to flow smoothly from the wells to the ports.
But introducing ships into the Gulf requires first ensuring that the main passages in the Strait of Hormuz are free of mines, and redirecting tankers that had moved away to other regions during the war, which is what Saudi Aramco CEO Amin Nasser described as a problem in the positioning of the global fleet, not in the availability of oil alone, according to what the British newspaper reported.
Shipping companies seem more conservative than politicians, Rais said Mitsui OSK Lines, Jotaro Tamura Shipping lines need to see the agreement reflected in the reality in the Strait of Hormuz, while the head of CMP Tech, Alexander Saveris, confirmed that his company will only cross the strait when it is fully convinced of its safety.
The cost of insurance increases the slow return, as companies await the reaction of insurance underwriters in London and Lloyd’s Corporation, while war risk premiums remain at high levels, approaching 7.5% of the value of the ship for some international tankers, a cost that means millions of dollars per week for a single oil tanker, according to the Financial Times.
Platts estimates that declaring the Strait of Hormuz “open for commercial” requires 30 to 45 days of calm, the return of a wide range of insurance companies, and the resumption of at least 50% of pre-war traffic, not just the exit of limited tankers from the region.
Stopped wells
Even if the shipping and insurance obstacles are removed, the return to production will remain gradual, as Rystad Energy estimates indicate that about 10,000 of the 36,000 oil wells operating in the region before the war are out of service, and some of them require technical treatment due to loss of pressure, corrosion, or mechanical failures.
Morgan Stanley expects only 50% of oil and gas production in the Gulf to return by September, and 80% by December, which means that the market may remain in a phase of partial supply shortages for months after the end of the confrontations, even as prices continue to fall from the height of the war, according to the Financial Times.
The physical damage to energy facilities increases the length of the recovery period. Although most of the Qatari Ras Laffan LNG complex can be resumed relatively quickly, the damaged parts may need 3 to 5 years for complete repair, according to the newspaper, while the UAE said that repairing its largest gas processing facility will take until next year.
Fragile stock
Wael Sawan said that the world was “borrowing from the future” to compensate for the lost Middle East oil, as a deficit estimated at about 1.2 billion barrels of unproduced or unexported crude accumulated during the war, and the number may rise to about two billion barrels by the end of the year if the restart of fields, refineries and shipping routes remains slow.
The shock was partially contained, according to the British newspaper and the US Energy Information Administration, by reducing the pace of operation of Asian refineries, China relying on its reserves instead of increasing imports, and releasing large quantities of strategic reserves in the United States and Europe, but this absorption made the system less able to confront a new disturbance in a large refinery, shipping lane, or production area.
Although Brent crude reached $118 per barrel during the war, it remained below the July 2008 peak of $147, but this reflects the destruction of part of demand, the use of stocks, and government intervention to mitigate the shock on consumers and companies, according to the newspaper.
Inflation remains
On the other hand, central banks in Europe view the end of the war as an endless relief of pressure, as officials at the European Central Bank said that high energy costs will remain for a longer period than hoped, and that the damage in the Middle East cannot be reversed overnight, according to Bloomberg.
The European Central Bank fears that the energy shock will turn into broader increases in prices and wages within the euro zone, keeping inflation much higher than the 2% target. Therefore, analysts and market traders quoted by Bloomberg do not rule out an additional hike in interest rates this year despite the decline in oil.
European Central Bank chief economist Philip Lane said that 4 months of rising energy prices means inflationary pressures will appear in food, goods and services this year and next, even if oil prices continue to decline after the agreement.
Bloomberg Economics believes that Brent may fall to the range of 70 to 75 dollars if the agreement is signed and implemented, but this scenario does not eliminate the impact of the previous months of rising energy, and does not dispel uncertainty about the details of any nuclear or security agreement with Iran.
Formation of supply maps
Major energy companies link a short-term recovery to a longer reshaping of supply maps, as Gulf countries search for pipeline routes that bypass the Strait of Hormuz, while energy importing countries in Asia and Europe seek to diversify suppliers, after the war showed the cost of relying on one narrow corridor, according to Bloomberg.
New gas deals reflect this trend, as Japan signed a 20-year agreement to import liquefied natural gas from Malaysia, while Baker Hughes CEO Lorenzo Simonelli said he expects an expansion in global liquefied gas projects aimed at reducing dependence on the Gulf.
Analysts believe that Iran’s continued practical control over the movement of the Strait may prevent a return to 100% of the previous capacity, especially if transit fees or security arrangements arise through which Western companies fear violating US sanctions.
Shipping companies recall the experience of the Red Sea, according to the Financial Times, where ship traffic remained about 50% lower than pre-2023 levels despite the de-escalation agreements, which makes Hormuz a candidate for a similar path, including a rapid decline in prices first, then a slow and cautious return to trade, and then a more volatile market than the market that preceded the war.
Kepler shipping expert Matthew Wright summarizes the dilemma by saying to the newspaper that the problem is no longer only the amount of oil available, but rather the confidence in the safety of the road, and in the ability of the authorities controlling the strait to manage it as a regular commercial corridor, a confidence that may need 12 to 18 months before it returns to levels acceptable to companies and importers.
