NEW YORK — A newly announced agreement to end the Iran war and reopen the Strait of Hormuz is unlikely to bring quick relief from high oil and gasoline prices or broader energy supply strains.
Energy analysts say it could take months for producers and shippers to restore operations enough to fully serve global demand. They note that moving crude, refining it into fuel, and reestablishing secure shipping routes are all slow processes, meaning any benefits from the deal will not be immediate.
Tankers carrying crude have been stuck in the Persian Gulf for more than three months, unable to safely pass through the strategic waterway. Before the conflict, the strait handled roughly one-fifth of the world’s oil and gasoline supply.
“It’s going to take time for people to feel comfortable and for insurance to be in place … particularly to get people on the ground to restart some of these assets,” said Daniel Evans, global head of fuels and refining research at S&P Global Energy.
Even so, oil markets reacted quickly to the announcement, with prices moving lower early Monday.
Brent crude, the global benchmark, fell $3.45 to $83.89 a barrel, while U.S. benchmark crude dropped $4.03 to $80.85 a barrel.
Those prices are still well above the roughly $70 per barrel where oil was trading before the war started.
As the higher prices unwind, ships that have been stranded will have to exit the strait, and then new tankers will have to come in to be loaded, Evans said.
“To bring a ship in, you need to be confident that you’ve got a big enough window of safety to bring it in, load it and move it out,” he added.
Oil tankers also move slowly, he explained. It takes months to travel from the strait to distant countries, deliver the crude oil to a refinery for processing and then arrive at its final destination.
In addition, some producers in the Middle East paused extracting oil from the ground, known as a shut-in, when they ran out of storage space. Restarting those operations can be a slow process.
Countries such as Saudi Arabia and United Arab Emirates, where there are alternate pipelines or routes besides the Strait of Hormuz to deliver oil, may be among the quickest to resume production, said Alan Gelder, senior vice president of refining, chemicals and oil markets at Wood Mackenzie, an analytics firm.
“But places like Iraq could be much more challenged because they’ve had a much bigger shut-in, their fields are more difficult … it may well take about a year before they get back,” he said.
Investment in the energy system, which can take years to see the results, ground to a halt after the strait’s closure, Gelder said. So it will take time for this capital to restart.
Countries that shut in oil production won’t want to restart until they know there is a stable, durable strait, and that a ceasefire will last more than 30 or 60 days, said Daniel Sternoff, senior fellow at the Center on Global Energy Policy at Columbia University.
“We don’t know what open means or what the speed of evacuation of trapped material is going to be,” he said.
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