US-Iran Deal to Reopen Hormuz Strait: Oil Prices to Stabilize?

Middle East — Ekhbary News Agency

The United States and Iran have reached a preliminary agreement to end their conflict and reopen the critical Strait of Hormuz, sparking optimism for an alleviation of the global energy crisis. Both nations announced the understanding last Sunday, with a formal signing scheduled for Friday, aiming to conclude the war that has disrupted worldwide energy supplies since February 2026. President Donald Trump, celebrating the accord, declared on social media: "Ships of the World, start your engines. Let the oil flow!".

Market Reactions and Price Fluctuations

The Strait of Hormuz, a vital maritime artery, normally handles approximately one-fifth of the world's oil and natural gas trade. Tehran's effective closure of the strait since the conflict's onset caused one of history's most significant global oil-supply disruptions. Prices initially fluctuated sharply; from around $72 per barrel on February 27, they peaked at $120 after the conflict began, only to drop further following the recent peace announcement. Several factors helped mitigate a larger price surge, including increased crude oil exports from the US, exceeding five million barrels daily in April and May, alongside a notable decrease in Chinese demand and coordinated releases from strategic reserves.

Challenges to Normalizing Energy Flows

For what it's worth, this agreement, while a significant diplomatic breakthrough, underscores the fragility of global energy supply chains. Industry experts previously warned that global oil stocks were nearing critical levels. Jorge Leon, an analyst at Rystad Energy, affirmed that "buffers are becoming thinner," stressing that inventory draws cannot fully offset a prolonged disruption to Hormuz flows. He suggested oil prices could rapidly climb to $150 per barrel this summer if blockades persisted. Restoring traffic through the strait, where hundreds of ships remain stranded, necessitates extensive security measures like clearing sea mines, indicating that a return to pre-conflict market normalcy could take several months.