Iran war: Even a peace deal won't fix energy crunch
The growing energy and supply chain crisis is unlikely to ease, even if the US and Iran step back from the brink. Experts warn that
The growing energy and supply chain crisis is unlikely to ease, even if the US and Iran step back from the brink. Experts warn that reopening the Strait of Hormuz and repairing infrastructure could take months or years. As the Iran war approaches 100 days on Sunday, a comforting but flawed assumption has taken hold. Many policymakers, businesses and investors believe that a rapid reopening of the Strait of Hormuz will quickly bring down energy prices, once stranded oil and gas tankers can finally leave the Gulf. Yet top oil executives, shipping sector leaders and economists are predicting the opposite. They caution that peace will not instantly return energy markets and global supply chains to normal. The fallout, they say, could last for many more months and even years. Amin Nasser, CEO of Saudi Aramco, the Gulf's largest oil supplier, told investors last month that even if Hormuz reopened immediately, it would "take months for the market to rebalance." If the closure was sustained for even a few more weeks, Nasser said that "normalization will last into 2027." Traffic through the narrow waterway between Iran and Oman remains at a fraction of normal levels, despite a fragile ceasefire and peace talks that have faced repeated setbacks. Oil prices remain around roughly 30% above pre-war levels, keeping gasoline, diesel and fertilizer prices significantly elevated. These additional costs are pushing up global inflation, disrupting supply chains and raising food prices worldwide as fertilizer — often made from natural gas — becomes more expensive for farmers.
'Stop-start' Hormuz reopening predicted Once a peace deal is reached, shipping firms must regain enough confidence to send crews back into the Gulf region, experts say. This could require an observation period of 30 to 45 days. Security arrangements, including international navy patrols, will also need to be in place to protect against any sporadic attacks on vessels. Shipowners and crews remain deeply cautious because strikes on shipping in Hormuz have continued, with multiple vessels hit last week alone, Chevron CEO Mike Wirth told Bloomberg on May 29, adding that reopening Hormuz would likely be a "stop and start" process. "It only takes one attack on a ship to put the vast majority of them off," Neil Crosby, head of research at market intelligence firm Sparta Commodities, told DW, adding that shipping firms have replaced Gulf revenues from other voyages, so "why bother taking the risk?" What's behind China's Strait of Hormuz bypass? To view this video please enable JavaScript, and consider upgrading to a web browser that supports HTML5 video Lloyd's of London, the world's leading marine insurance market, has seen war-risk premiums for Hormuz transits surge dramatically and remain elevated even after the ceasefire, which took effect on April 8. Once Hormuz is safe, the many tankers already stranded inside the Gulf will also need to exit safely, as fresh vessels sail from distant ports — some halfway around the world — to load new cargoes.
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