Iran war will throttle oil flows even if Strait of Hormuz reopens soon, analysis predicts
The ongoing Iran war is expected to have a lasting impact on global oil supplies, even if a ceasefire is reached and the vital Strait of Hormuz is reopened. According to Henning Gloystein, managing director of energy, industry, and resources at Eurasia Group, the repair of damaged oil refineries and energy infrastructure in the Persian Gulf could take several months to complete. Additionally, shipping companies operating oil tankers in the region may require at least two months to resume operations even if the conflict subsides.
A recent report by a United Nations panel confirmed that the shipping traffic through the Strait of Hormuz has significantly decreased, with transits dropping from approximately 130 per day in February to just six in March. This disruption has led to the sight of at least 70 large empty crude oil tankers anchored off the eastern coast of Singapore and Malaysia, with the capacity to hold over 100 million barrels of crude oil that would typically be transported from the Gulf region to refineries in Asia.
President Trump recently mentioned in a news conference that negotiations with Iran are ongoing, hinting at a potential ceasefire. However, he emphasized the importance of reopening the Strait of Hormuz, highlighting the vulnerability of the region to terrorist attacks that could easily disrupt oil shipments.
The uncertainty surrounding the conflict has caused oil prices to fluctuate, with benchmark U.S. crude rising 1.3% to $113.09 per barrel and Brent crude reaching $110.37 per barrel. The average price of gasoline in the U.S. has also increased to $4.12 a gallon, the highest since 2022.
Despite some increase in shipping through the Strait of Hormuz, oil markets are expected to remain undersupplied in the short term. This tightness in the market has led to record-high prices for key fuels such as jet fuel and bunker fuel, impacting industries like aviation and shipping.
In conclusion, the repercussions of the Iran war on global oil supplies and prices are significant and are likely to persist even if a ceasefire is achieved. The geopolitical tensions in the region continue to pose challenges for the energy industry and the global economy as a whole.
