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It may take months for the oil market to return to normal after the Strait of Hormuz reopens.
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Analysts point to a lag in restarting production and pent-up demand that could drive prices higher.
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It means crude prices could stay elevated through the rest of the year, forecasters warn.
The war that scrambled the oil market and sent prices soaring this year is all but over. But a return to normal for crude may still be nowhere in sight, energy analysts are warning.
Oil prices, which had already started to cool from their wartime peaks, slid further this week after the US and Iran announced they had reached an agreement to end the war. The deal, which will be officially signed on Friday, will reopen the Strait of Hormuz, the closure of which has choked off the world’s oil supply for more than three months.
A reopening of the Strait has been high on the market’s wish list. The hope has been that a reopening will jumpstart flows in the Middle East, cool oil prices, and remove the inflationary overhang on markets.
But investors shouldn’t be expecting that to come to reality anytime soon, with the market likely to grapple with a shortage for months as barrels slowly make their way out of the trading passage and appetite for crude ramps up heading into the summer, energy experts say.
Those continued supply pressures are evident in oil prices themselves, which remain well-above their levels at the start of the Iran war despite a resolution. Brent crude, the international benchmark, traded around $81 a barrel on Tuesday, up 12% from its levels in late February.
In its June forecast, the Energy Information Agency said it expected oil prices to average around $88 a barrel in 2026, implying a 22% increase from Brent’s pre-war levels.
Goldman Sachs said it estimated oil prices would end the year around $80 a barrel, implying a 11% increase in Brent.
HFI Research, one energy research firm, said it was still eyeing continued disruptions in oil markets despite the US and Iran reaching an agreement over the weekend. Assuming there’s “no issues” with reopening the Strait, tankers won’t be reaching the Persian Gulf until mid-June at the earliest, the firm estimated, pointing to logistical hurdles in bringing flows back online.
Oil production will also likely face a “logistical jam,” with crude production fully returning in about three months, it added.
Previously, the firm had warned that oil markets had reached a point of no return, meaning crude markets would face long-lasting damage from the war no matter how quickly a resolution came.
“We are hitting this scenario regardless of the status of the Strait of Hormuz. This scenario was baked in the cake the moment the Strait of Hormuz didn’t reopen by the middle of May,” HFI said in a client note on Sunday.
Bob McNally, the president of Rapidan Energy Group, said it would likely take until the end of June for ships to move through the Strait of Hormuz again. Longer-term structural damage of the war, meanwhile, will likely take “many months” to appear as nations restart production, he said, speaking to Bloomberg on Monday.
McNally added that oil reserves will likely continue to drain as nations rush to fill up their strategic reserves. China, the world’s most voracious consumer of crude, is likely going to want to build up “even bigger” reserves in the aftermath of the monthslong supply disruption, McNally said.
Summertime is also peak demand season in oil markets, he said, another factor that could add upward pressure on crude prices.
“That demand is going to soar back,” McNally said, speculating that Brent could soar back above the critical $100-a-barrel mark by July or August. “That demand is pent-up demand that has been suppressed in Asia, combined with this eagerness to top off and fill and increase strategic reserves, that could get ahead of the pace at which the oil supply from the Arabian Gulf returns to the market.”
“There are a lot of reasons why prices will go up from here,” he said.
Jeff Currie, a longtime commodities strategist and a senior advisor to Carlyle Group, said oil markets could see a small reprieve from price pressures in the coming months. After the Strait of Hormuz reopens, around 60 million barrels of crude that had been locked up in the Persian Gulf will likely be “flushed out,” but the market still has no long-term solution for restoring lost oil supply, he said, pointing to the long lag time in restarting production.
Nations like Kuwait, Qatar, and Iraq could take years to restore their lost supply, he said, referring to damaged energy infrastructure that affects those regions. Shipping insurers, meanwhile, will likely be hesitant to cover tankers in the Persian Gulf, he added.
“The answer is it’s going to take months and not until the end of the year,” Currie said of a return to normal.
Speaking to CNBC this week, top economist Mohamed El-Erian also flagged the risk of longer-term damage that had yet to be realized in energy markets.
“There’s the scarring element, the longer-term effects,” El-Erian said of how oil markets would be impacted by the Iran war. “So it is certainly good news, but not enough,” he added of the peace deal.
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