Iran war: Will the global energy crisis end soon?
A US-Iran deal to end the war and reopen the Strait of Hormuz could ease the global energy crunch, but oil prices and supplies may
A US-Iran deal to end the war and reopen the Strait of Hormuz could ease the global energy crunch, but oil prices and supplies may take months to stabilize as shipping restarts and infrastructure recovers. The United States and Iran announced on Sunday that they had struck a preliminary agreement to end their war, raising hopes for an end to the energy crisis that has gripped countries worldwide since the conflict began. "Ships of the World, start your engines. Let the oil flow!" President Donald Trump wrote in a social media post hailing the US-Iran agreement. The deal is set to reopen the Strait of Hormuz once both sides formally sign the accord on Friday. The narrow waterway is a crucial route for global energy trade, handling about a fifth of the world's oil and natural gas in normal times. Tehran has effectively shut shipping through the strait since the onset of the conflict on February 28, 2026, causing one of the largest global oil-supply disruptions in history. At the time, many anticipated prices to jump from around $72 (€62) a barrel on February 27 to as high as $150 to $200. In the end, the price increase was more moderate and a barrel of oil peaked at around $120 soon after the conflict started before going back down. After the US-Iran peace deal was announced over the weekend, the price dropped further. Demand destruction kept prices in check Increased supply from the US and other non-Gulf sources, decreased Chinese demand, the coordinated release of strategic reserves and market optimism that the conflict would end soon helped keep the price rise in check.
The US, for instance, increased crude oil exports in April and May to more than five million barrels a day, up from an average of about four million barrels a day in recent years, the Wall Street Journal reported. China, meanwhile, has significantly slashed its crude oil imports in recent weeks, relying instead on existing commercial inventories and strategic stockpiles. Fereidun Fesharaki, chairman emeritus of energy consultancy FGE NexantECA, told Bloomberg recently that the oil market had responded to the energy shock by demand destruction. China, the world's largest crude importer, has cut imports by four million barrels per day, he said. Emma Li, lead China oil market analyst at Vortexa, said China began to tap its massive domestic inventories in May to offset the Middle East supply disruptions, instead of buying crude on the spot market. This retreat from spot buying "significantly eased pressure on outright crude prices," she wrote in a research note at the end of May. Global oil inventories are falling fast China, however, is not alone, as countries around the world have increasingly tapped their domestic inventories to make up for the millions of barrels of oil stranded in the Persian Gulf. Oil stocks fell at an average rate of 5.3 million barrels per day between March and May, according to the US Energy Information Administration. Industry experts have warned though that the stocks were reaching critical levels. "Buffers are becoming thinner," warned Jorge Leon, an analyst at Rystad Energy and a former OPEC official.
The BriefWire