Following a framework deal between the US and Iran for a two-week ceasefire and the reopening of the Strait of Hormuz, energy prices are expected to remain elevated for an extended period. Futures markets suggest that it will take about seven to eight months for the oil supply and demand balance to return to normal, with some experts predicting prices will remain high throughout 2026. Natural gas supplies, particularly from Qatar's damaged facilities, are projected to take even longer, with futures markets indicating a return to normalcy only by the end of 2027 ft.com.
The conflict significantly impacted global energy transit, as roughly a fifth of the world's oil and LNG supplies typically flow through the Strait of Hormuz. During the hostilities, Brent crude, the global oil benchmark, peaked at approximately $120 a barrel, up from just under $70 before the war. Following the news of the framework deal, Brent crude fell to $83.55 a barrel, and some analysts believe it could temporarily drop below $80 before averaging in the mid-$80s by year-end if a full ceasefire is enacted bbc.com.
The return to normal shipping and energy production faces several challenges. More than three months of stranded oil tankers in the Persian Gulf need to exit, and new tankers must be loaded – a slow process given oil tankers' long transit times. Additionally, some Middle Eastern producers had to halt oil extraction, and restarting these operations, particularly in countries like Iraq with more challenging fields, could take up to a year. Investment in the energy system also slowed considerably during the conflict, and restarting this capital will take time to yield results barchart.com.
The energy shock extends beyond crude oil, affecting refined products and other sectors. In the US, gasoline prices have already risen from $3 a gallon to over $4 a gallon, with diesel prices for truckers increasing even more. Europe and the UK are also anticipating significant increases in gas and electricity prices. Furthermore, global food prices could be impacted, as fertilizer, a byproduct of oil, saw soaring costs due to the conflict, and substantial volumes of nitrogen-based fertilizer producers flow through the Strait of Hormuz. The current crop season has already begun, meaning a resumption of fertilizer supplies may be too late for some agricultural crops ft.com, bbc.com.
