Iran war's aftershocks: oil supply woes to linger, even with ceasefire
The brief respite offered by potential ceasefire talks between the U.S., Israel, and Iran masks a far more persistent problem: global oil supplies face a protracted disruption, according to a new assessment from Eurasia Group. While a cessation of hostilities might reopen the Strait of Hormuz, the damage already inflicted on energy infrastructure and the complexities of restarting shipping operations will ensure a tight market for months to come.
Refineries and shipping: a months-long recovery
Henning Gloystein, managing director at Eurasia Group, cautions that repairing the Persian Gulf’s battered refineries and energy networks will require “several months” of intensive effort. The scale of the devastation is significant, and the logistical hurdles in restoring production capacity are considerable. But the challenges extend beyond land. Shipping companies, essential arteries of global oil transport, face their own delays.
Gloystein’s report indicates that tanker operators will need at least two months to resume normal operations even if a ceasefire takes hold. The Strait of Hormuz, a critical chokepoint for global oil flow, remains heavily restricted, according to a United Nations panel. Ship transits have plummeted from approximately 130 vessels daily in February to a mere six in March, demonstrating the dramatic impact of the conflict.
The visible consequence? A startling accumulation of 70 large, empty crude oil tankers anchored off the coasts of Singapore and Malaysia. These vessels, collectively holding over 100 million barrels of crude—oil that would typically be en route to Asian refineries—highlight the profound dislocation in the supply chain. The journey from Singapore to the Gulf takes roughly four weeks, meaning these tankers won’t begin delivering Middle Eastern crude to Asia for another eight weeks, even after departing their current moorings.
Trump's rhetoric and the price surge
President Trump's recent comments, while suggesting “good faith” negotiations with Iran, underscored the strategic importance of the Strait of Hormuz. He ominously warned that even a single mine planted by a terrorist could effectively shut down the waterway, a chilling reminder of the fragility of global energy security. The market reacted swiftly, with oil prices oscillating before ultimately climbing. Benchmark U.S. crude rose 1.3% to $113.09, while Brent crude added 1.2% to $110.37 – both significantly above pre-war levels.
The impact on consumers is already being felt. The average price of gasoline in the U.S. surged to $4.12 a gallon on Monday, a stark increase from $2.98 before the conflict erupted, reaching levels not seen since 2022. “Oil markets will remain undersupplied, even with some increase in shipping through the Strait of Hormuz,” Gloystein concludes, emphasizing that the current tightness is particularly evident in record-high prices for jet fuel and bunker fuel, vital for the aviation and shipping industries respectively. The conflict’s echoes will reverberate through the global economy long after the guns fall silent.