Sunday's agreement to end the Iran war and reopen the Strait of Hormuz has raised hopes of lower energy prices, but energy experts caution that the impact on global oil and gas supplies will be slow to materialise. For European consumers already grappling with elevated costs, the relief is unlikely to be immediate.
The strait, through which roughly one-fifth of the world's oil and gasoline supplies transited before the conflict, has been effectively closed for more than three months. Ships loaded with crude remain stranded in the Persian Gulf, unable to safely navigate the waterway. Even with the deal, the process of restoring normal operations will be gradual.
Logistical Hurdles and Insurance Concerns
“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. The uncertainty over safe passage means that tanker operators and insurers will need clear guarantees before resuming voyages.
Evans explained that ships must first exit the strait, then new tankers must enter to load cargo. “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. The slow speed of oil tankers means that even after loading, it takes months to reach distant refineries and deliver final products to markets, including those in Europe.
Oil prices did slip on Monday following the announcement. Brent crude fell by $3.45 to $83.89 per barrel, while US benchmark crude dropped $4.03 to $80.85. However, these levels remain well above the pre-war price of around $70 per barrel, underscoring the persistent pressure on energy costs.
Production Shut-Ins and Regional Disparities
Some Middle Eastern producers halted extraction—known as a shut-in—when storage capacity ran out. Restarting these operations is a slow process. Countries like Saudi Arabia and the United Arab Emirates, which have alternative pipelines or routes bypassing the Strait of Hormuz, may resume production more quickly. “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,” said Alan Gelder, senior vice president of refining, chemicals and oil markets at Wood Mackenzie.
Investment in energy infrastructure, which typically takes years to yield results, ground to a halt after the strait's closure. Gelder noted that restarting capital flows will require sustained stability. Daniel Sternoff, senior fellow at the Center on Global Energy Policy at Columbia University, emphasised that producers will not restart operations until they are confident the ceasefire will last beyond 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.
Implications for European Energy Security
For Europe, which relies heavily on imported oil and gas, the slow recovery in global supply chains adds to existing challenges. The energy security benchmark has become a central concern for EU policymakers, who are also navigating the supply chain realities of diversifying away from Chinese components. The prolonged disruption in the Strait of Hormuz underscores the vulnerability of European energy markets to geopolitical shocks in the Middle East.
While the Iran deal represents a diplomatic breakthrough, its tangible benefits for European households and businesses will take time to materialise. As Evans put it, “It’s going to take time for people to feel comfortable.” Until then, high energy prices and supply constraints are likely to persist, reinforcing the urgency of Europe's long-term energy transition.
