Hormuz oil flows may stay tight into 2027 despite U.S.-Iran deal
S&P Global says Middle East energy shipments could take until next summer to return to normal after months of disruption in the Strait of Hormuz.
By Daniel Okafor · Business Editor
3 min read
A tentative U.S.-Iran agreement has raised hopes that oil and gas shipments through the Strait of Hormuz can restart, but analysts say energy markets may stay strained for months. S&P Global said Monday that flows through the key waterway are unlikely to return to normal until the summer of 2027.
The U.S. and Iran announced a memorandum of understanding on Sunday to end a conflict that Fortune reported has flared on and off since February. The agreement is due to be formally signed Friday and includes a provision to reopen the Strait of Hormuz, allowing Middle East oil and natural gas to move more freely to global markets, according to Fortune.
S&P Global analysts said the deal reduces longer-term worries about oil supply, but they warned that physical crude markets are likely to remain tight through this summer. S&P Global estimated that supply losses will top 1.5 billion barrels by the end of June.
The International Energy Agency has described the disruption as the largest oil market shock in history, according to Fortune. The strait has been effectively closed to commercial traffic for months, limiting one of the world’s most important routes for energy exports.
President Donald Trump said in a social media post announcing the framework that the strait would reopen “toll-free” and that the U.S. would lift its naval blockade on Iranian ports, Fortune reported. Traffic has not yet rebounded, however, as governments and shipping companies wait for more details on the agreement.
A BBC analysis published Tuesday found that only seven vessels had passed through the strait since the deal was announced. The BBC also reported that nearly 600 tankers and cargo ships were still largely idle in the Persian Gulf.
Oxford Economics said Monday that moving ships through the strait will remain more dangerous and expensive than it was before the war. Its researchers said energy prices may react faster than actual shipments, while physical flows are likely to recover in stages if the reopening plan proves credible.
Oxford Economics pointed to shipping problems, elevated insurance costs and operational caution as likely limits on a quick rebound. The firm said those issues could slow the recovery even if producers can restore output capacity quickly.
Wood Mackenzie analysts also expect a gradual recovery. In a May 29 note, the energy consultancy said that under a best-case reopening scenario, oil fields could reach 70% of prior production within three months and 90% within six months.
Wood Mackenzie said the remaining production, about 1 million barrels per day, would take longer to restore because of infrastructure repairs. The firm said Saudi Arabia and the United Arab Emirates are likely to recover faster because of stronger reservoirs and infrastructure, along with export pipeline capacity that can bypass the strait.
Wood Mackenzie said Iraq and other countries with older infrastructure are expected to recover more slowly. Capital Economics reached a similar view Monday, estimating that about 80% of energy flows could resume by the third quarter of 2026, while a full return to normal would wait until 2027.
This story draws on original reporting from Fortune.