The latest US-Iran deal reinforced expectations that oil shipments through the Strait of Hormuz will resume, triggering a sharp decline in crude prices, while, experts caution that the recovery in flows is likely to be slow, uneven and subject to significant logistical and security constraints, with full normalization expected to take considerably longer than the initial reopening.
The closure of Hormuz, through which nearly one-fifth of global seaborne oil trade flows, following US and Israeli strikes on Iran on Feb. 28, severely disrupted production and export systems across the Gulf and triggered one of the sharpest supply shocks in recent years.
According to data from the Organization of the Petroleum Exporting Countries (OPEC), combined crude production from Iran, Iraq, Kuwait, Saudi Arabia, the UAE and Bahrain declined from around 23.7 million barrels per day (bpd) in February to 13.5 million bpd by May, implying an average loss of roughly 10.3 million bpd at the peak of the disruption. Including Qatar, the total shortfall rises further, underscoring the scale of the impact on global oil supply.
The resulting loss of millions of barrels in daily production, coupled with heightened geopolitical risk, fueled extreme volatility in global oil markets.
After more than 100 days of war, Washington and Tehran signed a memorandum of understanding (MoU) on Sunday aimed at ending hostilities and restoring transit through the strategic waterway. The announcement triggered a sharp downturn in oil markets, with Brent crude retreating from its April 30 war-time peak of $126.41 to around $82, a level last seen in early March.
Beyond the cessation of hostilities, markets are now focused on how quickly and to what extent shipments through the Hormuz can normalize, how fast supply losses can be offset, and whether regional production can recover on a sustained basis.
- Speed of recovery depends on nature of disruption
Experts say markets have already delivered an initial verdict. Carole Nakhle, founder and CEO of UK-based consultancy Crystol Energy, told Anadolu that oil prices fell sharply on news of the agreement and could face further downside if the deal holds and shipping through Hormuz returns to normal, as the remaining geopolitical risk premium is gradually priced out.
However, Nakhle stressed that "reopening" the Strait should not be confused with full normalization. She stressed that shipowners, insurers and traders will require stronger confidence that security risks have genuinely subsided before operations can fully resume at pre-conflict levels.
"The speed of recovery depends on the nature of the disruption," Nakhle said, noting that "if the main issue has been shipping through the Strait of Hormuz, exports could resume relatively quickly once maritime traffic and insurance coverage are restored."
A full return to pre-conflict volumes, she added, would depend on the extent of any damage to production and export infrastructure.
Nakhle also said Gulf Arab producers are generally better positioned than Iran to accelerate recovery due to stronger financial resources and better access to technology, while Iran remains constrained by sanctions.
"Beyond the physical infrastructure, confidence matters: shipping routes can reopen quickly, but restoring confidence among shipowners, insurers and traders often takes longer," she added.
Market expectations of a relatively smooth reopening are also reflected in pricing, but analysts warn that operational bottlenecks could slow the pace of recovery even if political progress remains on track.
- Implementation would present far greater challenges
Neil Crosby, senior oil market analyst at Switzerland-based Sparta Commodities, said that while the agreement itself may be the easier step, implementation will be more challenging. He pointed to unresolved operational issues, including transit arrangements and fees, as well as mine-clearing operations.
"Full Hormuz flows within a week or two looks optimistic," Crosby said. While throughput could exceed 50% within a month, he warned that rebuilding the vessel supply chain across the Gulf and ensuring smooth restart operations would remain difficult.
By Firdevs Yuksel
Anadolu Agency
energy@aa.com.tr
