High oil and gasoline prices and energy supply problems won't be solved overnight, despite an agreement to end the Iran war and open the Strait of Hormuz announced Sunday, according to energy experts cited by The Hindu Business Line. It will likely take months before energy companies can resume operations to the point of meeting the world's demand.
The Timeline for Recovery
The slow pace of shipping and refining crude oil, along with doubts about security, means the effect won't be seen immediately. Ships loaded with crude oil have been stranded in the Persian Gulf for more than three months, unable to safely travel through the waterway, through which about a fifth of the world's oil and gasoline supplies typically traveled before the war began, the source reported.
Daniel Evans, global head of fuels and refining research at S&P Global Energy, explained: “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.” First, ships that have been stranded will have to exit the strait, and then new tankers will have to come in to be loaded. “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 move slowly; 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.
Challenges in Resuming Operations
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. Alan Gelder, senior vice president of refining, chemicals and oil markets at Wood Mackenzie, noted that investment in the energy system, which can take years to see results, ground to a halt after the strait's closure, so it will take time for capital to restart.
Daniel Sternoff, senior fellow at the Center on Global Energy Policy at Columbia University, pointed out that 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. “We don't know what open means or what the speed of evacuation of trapped material is going to be,” he said.
Regional Differences in Recovery Speed
| Country/Region | Expected Recovery Timeline | Key Factors |
|---|---|---|
| Saudi Arabia & UAE | Among the quickest | Alternate pipelines or routes besides the Strait of Hormuz |
| Iraq | Much more challenged; may take about a year | Larger shut-in, more difficult fields |
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 Gelder. “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 added.
Implications for Global Markets
For commodity traders and procurement teams, the extended recovery timeline means that tight supply conditions are likely to persist for months. The slow unwinding of stranded tankers, the cautious approach from producers awaiting a durable ceasefire, and the time needed to restart shut-in wells all point to a prolonged period of elevated oil prices and potential supply bottlenecks. The lag between the Strait's reopening and material improvement in global crude flows will require careful management of inventory and hedging strategies.
Sources:
